Central bank inked deal with Ripple last week to use blockchain for cross-border payments Saudi Arabian banks could save up to $400m per year using blockchain software to facilitate cross-border payments, which is a credit positive move for the lenders, according to Moody’s Investors Service. In particular, the cost of processing the high volume of remittances sent home by migrant workers in the kingdom could fall by 50 per cent through use of the distributed ledger technology, a Moody’s report said on Tuesday.
The kingdom’s central bank, Saudi Arabia Monetary Authority (Sama), signed an agreement with US fintech company Ripple last week, to run a pilot project to help banks settle payments using blockchain. “Moody’s estimates that even a 10 per cent reduction in the cost of completing and managing a cross-border transaction will translate to savings of roughly $200m-$400m per year system-wide,” said the Moody’s report.
GCC countries are increasingly looking to fintech (financial technology) to improve efficiency in their banking industries, with financial free zones including the UAE’s Abu Dhabi Global Market and Dubai International Financial Centre issuing regulations to govern the fast-growing sector. Bahrain, which aims to become a global hub for fintech, launched a fintech ‘regulatory sandbox’ last year, enabling firms to test and develop products in a virtual space.
Sophisticated ledger technology such as blockchain could be of particular value in remittance transactions, Moody’s said. UAE Exchange agrees tie-up with blockchain start-up Ripple Abu Dhabi Securities Exchange signs agreement with Swift and other parties to adopt blockchain technology Dubai government agencies to adopt Blockchain technology Blockchain is an electronic transaction-processing and archive system that allows parties to track information in a secure network without the need for third-party verification.
Banks and foreign exchanges currently have to fork out hefty administrative costs in the form of third-party foreign exchange handlers, which also hikes costs for their customers. Saudi Arabia, like other GCC countries, has a large number of migrant workers that account for a high proportion of low-value transactions when they remit money to their home countries. Read more from thenational.ae…
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