The use of distributed ledger tech (DLT) for transborder payments is increasing among various Central Banks around the globe. The recent bank to embrace blockchain technology in the remittance field is the National Bank of Egypt (NBE).
With the help of the UAE-based monetary services company LuLu International Exchange, the NBE will be using this network to offer overseas Egyptians doing their businesses in the United Arab Emirates using Ripple blockchain-based payment network to facilitate faster transactions.
According to Ken Research, the Egypt international remittance market is estimated to hit over $30 bln in terms of overall transaction value by 2023. Currently, Egypt receives over $26.8 billion in remittances.
Egypt is now the 5th biggest remittance receiving nation globally and 1st in Africa and is now planning to use blockchain in the remittance corridor so that it can retain its position or even surpass its rivals such as the Philippines ($35.2 billion), Mexico ($38.5 bln), China (68.4 bln) and India ($83.1 bln).
Many factors decide the hours or days it takes for money to reach an overseas account. Some of the factors that influence transfer time include the payment method being used, the currency used, weekends and holidays, cut off times, time zones, and many others. Nevertheless, a standard timeline for most international transfers is around 1 to 4 business days, which is 24 to 96 hours.
Blockchain technology is the future of money, so it is now possible to complete an overseas transaction in not more than 15 minutes. For instance, when a user employs the Bitcoin blockchain network, it takes one an average confirmation time for a Bitcoin payment of nearly 10 minutes. This implies that the BTC Blockchain network is 144 to 576 times faster than banks when making international transfers (remittances).
On the side of Ripple, transaction confirmations are immensely fast because they take 4 to 5 seconds, compared to the hours and days required by banks to sort out a wire transfer or the minutes it takes for BTC transactions to be verified.
In addition, the transaction fees are very low - the fees of a standard transaction on the RippleNetl is nearly 0.00001 XRP. Currently, the cost of 1 XRP is about $0.29. The average BTC transaction cost is about 0.0011 BTC or $59.9 and the median fee is about $26.5 per transaction.
This simply implies that the transaction fee incurred using the Ripple blockchain is so cheap compared to other blockchains and banks - that it's practically free!. So, when the National Bank of Egypt starts using blockchain in remittances, it will have access to ‘cheaper, effective, quicker and more reliable’ payments.