How Crypto Can Solve Cross-Border Payment Challenges

Globalization in world trade has enabled incredible economic growth and a tremendous flow of goods and money across the continents. While the country that greatly facilitated this state of play is voluntarily setting up dams that limit the flow of global trade, even the zaniest of mused tariffs won’t stop the demand for cross-border payments from being facilitated efficiently.

Retail, wholesale, and corporate and government transactions all regularly require a cross-border payment to be completed. However, despite how modern mainstream international payment systems are, they incur many challenges. Efficiency, costs, and time delays all play into a desire to find a better solution. It’s because of these challenges that the rising field of crypto is showing such promise and drawing in more and more suitors.

Why cross-border payments are essential

Cross-border payments are essential for the movement of money around the world, and the more efficient these payments can be, the more efficient global trade can be. Trillions of United States dollars are transferred between countries every single year, and by 2030, estimates see the market as growing into the $3 trillion bracket. It’s been found that, where once there were 0.5 cross-border transactions per capita annually in 2014, there are now 0.7.

Card networks, major banks, governments, consortia, and international non-profits have enabled this market to exist. The Single Euro Payments Area (SEPA), Clearing House Interbank Payments System (CHIPS), and Society for Worldwide Interbank Financial Telecommunication (SWIFT) all make various regions of cross-border payments as streamlined as possible under the current setup of financial transactions.

Challenges faced by current cross-border payment systems

Well established and capable of catering to a growing multi-trillion-dollar market, you’d be mistaken for thinking that mainstream cross-border payments are as good as they can get. The entities involved have certainly developed the technology that’s underpinned finance for decades to a point where cross-border payments are much faster and less costly. Still, these transactions do face many challenges.

One of the challenges to facilitating cross-border payments is that banks don’t often directly transfer funds between one another. Instead, interbank networks, payment providers, and specialized organizations will work as intermediaries to facilitate bank-to-bank communications around the world. It’s a very structured process with security checks throughout, enabling it to earn a lot of trust, but it all comes at a cost.

Naturally, involving intermediaries results in transactions taking much more time to complete. Further, the legacy infrastructure relied upon throughout further compounds this. There’s a limited capacity for handling payment data, real-time transaction monitoring is also rather limited, and then there are the costs to businesses. Those seeking to send a cross-border payment will have to pay potentially multiple bank fees and will be beholden to fluctuating exchange rates.

How secure and seamless crypto payments can solve the challenges

Crypto payments are all facilitated by a blockchain. This innovative bit of tech enables the payment system to be fully automated, fast, cost-effective, and offer additional benefits like increased security against fraud, transparency on the network, and a greater degree of privacy. However, crypto payments simply can’t be integrated into the established payment networks. Instead, businesses need to turn to a secure crypto payment gateway.

The gateway works by creating a unique crypto address for customers’ payments to go to, which then gets confirmed for the receiving party by the gateway to complete the transaction. The 24/7 system is without limits, very fast, and very secure because of how it taps into the innate benefits of the blockchain. The gateway’s seamless integration is further buoyed by the advanced encryption and authentication tools to keep each payment secure.

Just about any cross-border crypto payment that’s facilitated by a secure gateway will be speedier and cheaper than the current systems. Still, people making these international payments would lean towards more stability to also eradicate the challenge of fluctuating exchange rates. This is where increasingly popular stablecoins can come into play. They benefit from the blockchain system and are underpinned by reliable commodities.

Cross-border payments come with many challenges as they’re currently performed, but a big part of the solution could be pivoting to crypto payments and blockchain technology.