5 ways blockchain can change the cross-border payments landscape

Cross-border payments is a changing sector of the industry, driven by customers demanding little to no friction and encountering multiple steps, intermediaries and fees. Every step along the path of a cross-border transaction requires time and money, with the average cost of remittances sitting at 7%, according to a 2018 World Bank report. The industry has reacted through the creation of new faster payment initiatives, aimed at reducing delays in payments and standardising intermediary fees. Others have turned to distributed ledger technology (DLT) and blockchain as potential cure-alls for cross-border pain points.

There is a raft of blockchain pilots and proofs of concept when it comes to settling cross-border payments. Visa has been developing its B2B Connect payments project since 2018, developing the system on Hyperledger Fabric. IBM announced its World Wire payment network in March, promising real-time cross border payments and foreign exchange in 50 countries globally. US bank JP Morgan followed suit in April, unveiling its Interbank Information Network powered by Quorum, a permissioned blockchain based on ethereum and developed in-house. To those who believe blockchain can change the cross-border payments industry, the technology can help in numerous ways.


Conducting cross-border payments can be expensive. Banks often do not have direct relationships with one another at great distances, often having to turn to intermediary banks to facilitate an indirect transfer. The intermediary bank charged a fee for this service, deducted from the total transfer amount. Costs can be shared between the remitter and the beneficiary or paid in full by either party. This occurs on top of fees charged by the remitter or the beneficiary in the first instance.

According to a March 2018 impact assessment from the European Commission, the average fee for a cross border transaction of €100 in 2017 ranged from €2.69 in Denmark to €19.98 in Bulgaria. Fees charged to non-euro area remitters were higher, an average of €24.03 per €100 sent.

Proponents of blockchain technology state that by eliminating the need for intermediaries, the fees for sending cross-border payments would be reduced dramatically. The fees paid by parties in the transaction would be limited to charges levied by the operator of the distributed ledger technology (DLT). The preliminary results of Ripple’s xRapid blockchain pilot, reported in May 2018, saw banks saving 40% on average.

Fast settlement

According to an R3 report, cross-border payments made using an intermediary can range from two to five business days to complete. There can be a significant time zone difference between the two involved currency jurisdictions. To settle each currency leg, the funds need to be transferred through the relevant domestic payments systems, and the operating hours of these systems vary across international time zones.

The Ripple blockchain underpinning the firm’s cryptocurrency XRP boasts transaction times of between two to six seconds. Currencies operating on the ethereum blockchain operate with average transaction times of between 15 seconds and four minutes. Blockchain.com records transaction confirmation times peaking at 141 minutes at their slowest, with the fastest occurring around the six minute mark.


Records on a cross-border blockchain would be secured via cryptography. Network participants have their own private keys assigned to the transactions they make, which act as a digital signature. If a record is altered, then the signature becomes invalid. This results in the peer network identifying that something has occurred.

Due to the fact that blockchains are decentralized and distributed across peer-to-peer networks the chain is updated and synched across multiple places at once. This means that a blockchain does not have a single point of failure and cannot be changed from a single computer. To perform a successful change, an attacker would need access to 51% of the participants to alter them all at the same time, something requiring enormous computing power.

The damaging Bangladesh Bank heist, which involved criminals using credentials lifted from the country’s central bank to siphon more than $81m via SWIFT messaging, is an incident which proponents of a blockchain-based cross-border payments system believe would not have occurred with a DLT system. A networked system would have identified the attackers attempts to erase their actions from the database and would have made tracking where the money had been sent much easier.


Supporters of a cross-border payments blockchain believe that compliance is simplified in a distributed ledger system. In a public ledger the identity of a user is concealed, yet the holdings and transactions of each address are open to viewing. Using an explorer and the public address, it’s possible for a third party to view all transactions carried out by that address. In a private permissioned blockchain, these details are only viewable by participants involved in the transactions. The ledger is indelible and unforgeable, while entries into it must be validated by the system. To change a block in the chain, every other block in the system would need to be altered.

According to a 2018 report from the Financial Executives Research Foundation, a blockchain-based system could eliminate the need for traditional financial reporting bodies. This transparency, argue blockchain proponents, would eliminate the need for checks and balances that require resources and manpower. Third-party of regulatory access to the private blockchain, according to an Infosys study, could be guaranteed through the establishment of a separate blockchain data layer with records the transactions without needing direct access to the blockchain itself.

Analysis from the Bank for International Settlement found that “by allowing information that is in a common format to be shared across participants to a transaction, the use of DLT may reduce data discrepancy, facilitate quicker reconciliation and eliminate or reduce burdensome back office activities.”

Encourages competition and innovation

The emergence of a blockchain technology, as well as blockchain-based payments firm Ripple, has put pressure on existing cross-border payments institutions like SWIFT. The firm, which operates a network of more than 11,000 financial institutions across 200 countries, launched its global payments initiative (gpi) in 2017 with an aim to create a faster, trackable, and more transparent payments network.

SWIFT gpi uses real-time tracking and an end-to-end view of payments using tracking codes, and the group claims 50% of gpi payments are credited to end beneficiaries within 30 minutes, 40% in under five minutes and “many more” in seconds. SWIFT announced this week that it would be embedding gpi into the European TIPS instant payment system.

SWIFT also signed a partnership with blockchain consortium R3 in December 2018 for the integration of gpi into the latter’s Corda Settler platform. Corda Settler uses Ripple’s cryptocurrency XRP as its settlement system, bringing the two supposedly rival companies into something akin to collaboration. At the time of writing, SWIFT has avoided using XRP, or any cryptocurrency, as a clearing unit, due to the fact that banks aren’t ready to operate with something so volatile.

“All trade platforms require tight linkages with trusted, fast and secure cross-border payments mechanisms such as gpi,” said Luc Meurant, SWIFT CMO, at the time of the announcement. “While DLT-enabled trade is taking off, there is still little appetite for settlement in cryptocurrencies and a pressing need for fast and safe settlement in fiat currencies.” It remains to be seen whether it will move beyond the proof-of-concept stage, but for now the complex link will continue to create debate about the future of cross-border payments.

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