The BNY Mellon investment company has released a report “Innovation in Payments: The Future is FinTech”, in which it estimates the changes in the global payment system.

Considering the consumer and retail payments as the fastest-developing sphere, the authors admit that the demand for high-speeded, convenient and easily accessible transactions is now on the rise. Digital currency solutions are listed in the report among the innovations meeting that demand.

Describing bitcoin digital currency as the most well-known one, the payment infrastructure of which demands much lower fees than those of the fiat currencies, the report outlines the necessity to buy and sell it as a “substantial barrier to adoption” of the technology which lies behind it.

According to the report, cryptocurrencies tend to be viewed less as stores of value and more as means of reducing friction within the payment process. What is of greatest importance, still, is the ability of the distributed ledger technology to help improve the speed, efficiency and transparency of transactions, as well as to reduce their cost.

“The blockchain... is the real innovation which a growing number of banks (including BNY Mellon) believe may be effectively leveraged to transform payments,” states the report.

In a short paragraph dedicated to the Ripple Protocol, its growing popularity among the world's most influential banks is sited along with its potential ability to challenge SEPA and SWIFT.

Among the difficulties associated with blockchain which are yet to be resolved BNY Mellon report indicates managing “the ever-increasing length of the chain itself” and the unclearness of how to reconcile regulators' requirements for transparency with the actual anonymity of the transactions made via blockchain.

As a conclusion, the report states that “digital currencies and blockchain in particular have the potential to significantly shake up payments”, and therefore banks have to work to remain “relevant, prepared and proactive”. Almost the same sentiment was shared by the authors of the McKinsey annual report in which the new technologies were described as the real challengers to the traditional banking sector.

Maria Rudina