Cross-Border Transactions Could Be The Only Way To Adopt Crypto For Mainstream Payments

Fed up with exchange fees airports? That annoyance is soon to vanish with cross-border payment options enabled by crypto. Keep reading to learn how.

What’s Wrong With Cross-Border Payment Solutions?

It’s no secret that the cross-border payments landscape using traditional rails is fraught with fees, hurdles and delay. Individual senders incur outsized fees for the billions of dollars transferred in personal remittances each year. Global businesses choose between bearing an FX cost or passing that cost onto their customers. And all of those involved must wait days or weeks to complete transactions. The bottom line: sending money via traditional rails is far from a borderless experience. Legacy infrastructures simply cannot keep with the fast-pace and urgency of the modern.

Part of the problem is that systems are not interoperable. To send money to different corners of the world without blockchain, a whole patchwork has been haphazardly knitted together over the decades to achieve some semblance of financial interoperability between financial institutions, correspondent banks and money transfer operators along the value chain. Connecting these disparate systems, particularly in underserved markets, where the local currency is not globally traded, has created friction that results in long delays and high fees at each link of this chain.

Just last year, the G20 made enhancing cross-border payments a priority, citing the benefits a faster, cheaper, more transparent system would deliver for citizens and economies worldwide, and increasingly, global policymakers recognize that blockchain technology can solve the problem posed by outdated financial infrastructure. But the solution isn’t just within sight — the solution already is here. And that is Crypto — backed by Blockchain Technology! With its speed and reliability, crypto is delivering on its promise with seamless cross-border payment options today.

How Difficult Is Creating Such Global Public Networks?

No biggish! Because such networks are already here! Blockchain technology is showing that we can connect financial infrastructure so that no matter where you are in the world, systems and forms of value can interoperate with each other. Stellar, a public blockchain built for interoperability, has a network of more than 20 anchors around the world who are integral parts of connecting global financial systems. These anchors are regulated financial institutions, money service businesses, or fintech companies that issue 1:1 backed fiat tokens and/or provide a fiat on/off-ramp.

The goal is to open markets to new remittance and payments corridors, like between Europe and Nigeria, Africa’s largest Sub-Saharan remittance market. For example, Cowrie Integrated Systems, a financial technology company with headquarters in the United Kingdom, provides value-added services over electronic payment networks. Given recent guidance out of the Central Bank of Nigeria, Cowrie designed a payment channel to leverage USDC, one of the world’s leading stablecoins, as a bridge to help businesses reduce the friction of sending payments to Europe.

Working with Tempo, an electronic payment institution based in France and the issuer of EURT, a euro stablecoin also pegged 1:1 to fiat reserves, they are developing a bi-directional channel for customers to redeem and trade these tokens right away. This resulted in savings in terms of costs and time and showed the power of connecting global financial systems so they are easily interoperable, efficient, affordable, and most importantly, accessible. This is exactly what the cross-border payment options need — of course, in mass operation — to keep with the demand.

That Brings Us To Openness, Innovation & Interoperability

Open networks allow innovation from the many rather than the few. Open networks ensure that anyone can build upon, improve and challenge the technology and push the market to consider the next idea. Open networks promise interoperability and allow for continual ideation and progression. If we were to start building this technology in a silo, on closed networks that can’t work together, we would risk putting ourselves right back where we started. By working to connect traditional rails with digital ones, we can reap the benefits and work through shared challenges.

For all the promise crypto offers, there are still barriers, including technology regulations and scalability. In addition, financial institutions have been slow to offer cryptocurrency even though they realize it’s important to customers. Only about 10% of financial institutions offer crypto to consumers and, of those, only 4% plan to change that. Added that everyday consumers still lack awareness about the fundamentals of blockchain that powers cryptos. Head of Innovation at Synovus, Matt Maxey, recognizes there are risks, but thinks there’s great potential for crypto. He says,

“Within the United States, the ongoing governmental and regulatory evaluations of crypto, and in general, digital asset frameworks, pose some short-term risk to adoption in financial services and banking. When the dust settles, I believe we will see a meaningfully regulated ecosystem that provides clarity and fits tightly within banking models”

Making Blockchain Mainstream For Everyday Consumers

Confidence in blockchain technology — especially for digital currencies such as USDT — is growing across the board. Governments are accelerating their work on Central Bank Digital Currencies. Businesses are building and investing, with the vast majority of global executives surveyed by Deloitte last year saying they believe digital assets will be important to their industries within the next three years. But the benefits of innovation, especially in the financial sector, cannot be gained at the expense of additional risk to consumers. That’s where central banks still dominate.

Central banks and regulators, entrusted with the duty to protect consumers, draft and enforce regulations guided by that responsibility. But, as the Tempo-Cowrie example demonstrates, deployed correctly, blockchain technology can be leveraged to benefit consumers without sacrificing oversight, accountability or regulation. This is why it is all the more important for us to demonstrate to stakeholders what a difference blockchain can bring for consumers, citizens and businesses, boosting global economies — and how the technology can be subject to regulatory oversight.

This is why it’s critical for private sectors to engage with governments to ensure that new regulations balance the need for new and improved financial rails with the need to guard against innovations that empower illicit actors. The desire to get this right is shared by all stakeholders and it’s by working together that we will achieve the balance. Blockchain is real and actionable today, ready to tackle cross-border payments as well as impact financial use cases for consumers, nations, and businesses. Therefore, with a public-private partnership, we can take it mainstream.