Blockchain’s impact in the crowded cross-border payments space

Cross-border payments is one of the areas of financial services that are still burdened by high friction and high costs, be it in trade finance, customs remittance or standard payments by consumers and businesses. Removing the friction of fiat currency crossing borders is one of the biggest areas that blockchain technology will reveal benefits.

Blockchain initiatives will have to compete with other fintechs and the traditional financial system.

Blockchain technology can provide singularity, transparency and immutability. It provides visibility and certainty around when funds are going to be paid, backed up by some form of smart contract. This not only makes cross-border payments more transparent and secure, but quicker and cheaper.

This would be of great benefit to banks, businesses and individuals, in providing working capital around the world, removing the costs and time constraints that have been an affliction of cross-border payments historically. Many of these are doing so without using blockchain and are still able to provide fast and cost-effective payment systems. The challenge for blockchain-based providers will be to create solutions that have the same global reachability with liquidity in different currencies and access to different payment systems around the world.

Blockchain initiatives will have to compete with other fintechs and the traditional financial system. Again, there is a need for standardisation across networks to allow blockchain-based solutions to compete.

There are challenges around that, although not insurmountable. Interoperability can be attained on a basic level through APIs, or by having a universal blockchain that connects different ones.

We see that there will be multiple blockchains provided by different financial market infrastructure providers, so interoperability will be key.