Analysis by Binance Research argues that blockchain technology could transform the current payment infrastructure by allowing self-custody of digital assets and cutting out the middlemen from transactions.
Seemingly unfazed by its inefficiencies, the payments industry has grown into one of the largest in the world, currently estimated to be producing $2.83 trillion in revenues as of 2024.
The report highlighted the advantages of using cash for in-person transactions, noting the "unique freedom of money" it provides, a feature modern digital payment systems fail to offer.
"Without blockchain technology, there is no means of having self-custody of digital money," Binance Research said in the report published today, highlighting the limitations of current digital payment methods.
The cryptocurrency exchange’s analysts claim that today's global payment system relies on a "lengthy chain of rent-taking banks and other intermediaries," creating inefficiencies and high costs.
Introduced in 2009 by the pseudonymous Satoshi Nakamoto, Bitcoin was designed as a form of peer-to-peer electronic cash to offer the same freedom as cash transactions for digital payments.
Bitcoin’s decentralized approach allows direct transactions between individuals without financial intermediaries such as banks, promoting "financial freedom, transparency, and reduced transaction costs."
The analysis comes at a time when the crypto industry has seen big developments, including the rise of stablecoins and advancements in blockchain technology speeding up transactions and cutting costs.
Binance noted that "various Layer 1 and Layer 2 solutions have effectively reduced bottlenecks that previously impeded the adoption of distributed ledgers for mass payment transactions."
Despite these advances, Binance believes that the global payments industry still operates on outdated infrastructure. "The payments industry still largely runs on outdated, 50-year-old bank-tethered infrastructure," the report stated.
Although fintech firms like Stripe, Mastercard (NYSE:MA), and Visa (NYSE:V) have improved the user experience, the cost of involving multiple intermediaries remains.
Binance argues that blockchain technology offers "a new set of globally-enabled infrastructure rails for payments," potentially reducing the costs and speeding up cross-border transactions. It cited Visa’s pilot projects, which use public blockchains to settle global payments, and products like Binance Pay, which enable peer-to-peer and cross-border transfers with lower fees.
However, Binance acknowledged that the "massive" size of the payments industry means that the adoption of blockchain technology is likely to be gradual.
"This gives the blockchain industry itself the necessary time to grow out of its adolescence," stressing the need to deal with challenges like scalability, better user experience, and unclear regulations.