PYMNTS Intelligence: Evaluating the ROI of Blockchain Technology

As businesses and financial institutions (FIs) look for the best returns on their payments infrastructure investments, blockchain technology has become an increasingly diverse and promising area to explore.

Among surveyed businesses that operate in 10 or more countries, almost 69% said they use smart contracts that trigger payments without human intervention when preset conditions are met, while more than 31% said they employ blockchain technology or cryptocurrencies in their asset management. Those numbers decrease for firms operating in fewer countries, and less than 25% of surveyed businesses operating in just two countries use smart contracts for payments.

There is interest in expanded use, however, with 42% of all businesses surveyed saying they use smart contracts for payments, while another 13% said they would be interested in triggering payments with smart contracts.

At the same time, cryptocurrencies are still an area of strong interest worldwide. In the U.S., 23% of surveyed consumers said they believe crypto is the future of money, compared to 59% in Latin America and 58% in Africa, where long-term hyperinflation impacts trust in local currencies. While recent volatility may tamp down cryptocurrency enthusiasm, central bank digital currencies (CBDCs) and other blockchain-based payments appear to hold promise for a more stable use case with the same cost and speed benefits of crypto. Ninety percent of surveyed institutional investors said the past three years have seen greater interest not only in cryptocurrencies, but also in CBDCs and enterprise blockchains.

This month, PYMNTS Intelligence looks at the data businesses should consider when evaluating the potential return on investment (ROI) of blockchain technology and the trends that will shape the future of digital currencies.

Blockchain Payments Beyond Crypto

Cryptocurrencies have yet to capture a significant portion of payments. While those saying they have owned crypto grew from 16% in 2021 to 23% by early 2022, more than half of crypto owners still see it chiefly as a form of investment. Cryptocurrency use has shown the potential of blockchain payments, however, in terms of speed and cost. The impact has been significant enough that 37% of surveyed consumers said they believe blockchain technology enables faster payments, and 68% of those who have used crypto shared that sentiment. In addition, 82% of chief financial officers and finance chiefs said crypto payments settle faster than non-crypto payments, and 88% of surveyed merchants said they have experienced faster payments with crypto. While crypto may not be making significant gains as a transactional currency in North America, interest is higher in other regions. Only 19% of surveyed small businesses in the U.S. and 8% of those in Canada said they want to enable crypto payments in the short term, but that percentage rose to 30% in Brazil, Hong Kong, Singapore and the United Arab Emirates.

Many of the benefits of speed and reliability associated with crypto extend to other blockchain payments, with smart contracts lessening the need for intermediaries and 90% of surveyed central banks looking at CBDC deployment. The majority of central banks in “advanced economies,” including the U.S. and Japan, said there could be a future in payments for stablecoins pegged to and backed by fiat currency. Sixty percent of overall respondents were much less impressed with cryptocurrencies, saying they have “trivial or no use” in domestic payments, and 40% gave the same prognosis for crypto in cross-border payments. Some central banks considering CBDCs are most interested in digital currency as a means of catalyzing innovation, while others are looking for it to complement existing monetary systems.

The Growing Role of Blockchain Payments

The number of potential blockchain uses in all types of transactions might be limitless, however. Some have even compared the advent of blockchain to the rise of the internet itself. Blockchain is expected to change everything from how transactions are conducted to how data of every kind is stored, accessed and shared. It could alter supply chain management, contract mediation and all forms of asset trading, for example. In the case of payments, this means that blockchain is not only the source of new currencies, but it also has a role to play in how currencies and assets of all kinds are transacted.

It is no surprise, then, that 73% of respondents to a Deloitte executive survey with a focus on the financial services industry said they are concerned about losing a competitive advantage if their organizations do not adopt blockchain and digital assets. Eighty percent said they expect digital assets will be either very or somewhat important in their respective industries within the coming two years, and 43% of financial services industry respondents said digital assets have a very important role for their organizations regarding new payment options. Respondents also demonstrated a positive view of how far blockchain technology has come, with 81% overall saying the technology is broadly scalable and has achieved mainstream adoption. The question of whether to invest in blockchain technology seems largely settled within the finance industry, with companies having to decide how and when to invest while measuring immediate costs against the risk of falling behind competitors.

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