Blockchain is one of the technologies that is poised to disrupt the way companies and individuals process financial transactions on a global scale.
Though it’s increasingly common for businesses to source goods and services internationally, the cross-border payment system hasn’t changed in decades.
Each phase in the crypto cross-border payment solution requires time and money with the average cost of remittance. So this can be eradicated through blockchain technology.
Blockchain technology can create new faster payment initiatives, aim to reduce delays in the payment and also standardize the third party fee.
Now let us see how blockchain empowers the cross-border transaction
Generally cross-border payments are expensive and also banks do not have a direct connection with one another at a distance, often they need to turn to an intermediary banks to facilitate an indirect payment.
When integrated blockchain, the need for intermediaries is eliminated and so the fees for sending cross border transactions would be reduced drastically. The transaction fees will be limited to charges levied by the operator of the DLT.
It has been proved that the cross-border payment made using a third party can range from two to five business days to complete the transaction. So apparently there can be a significant time zone difference between the two involved currencies.
The blockchain technology boasts transaction times of between two to six seconds. Using blockchain the confirmation times peaking at 141 minutes is the slowest and with the fastest occurred around the six minute mark.
A cross-border transaction that happens on through the blockchain technology is secured by cryptography. The network participants have their own private keys assigned to the transaction. This will act as a digital signature. If the record is altered, then the signature becomes invalid.
Blockchain are decentralized and distributed across multiple P2P networks; the chain is sync across multiple places at the same time. This means the blockchain does not have a single point of failure and cannot be changes from a single computer.
The emergence of blockchain technology , as well as blockchain-based payments will create a faster, trackable, and more transparent payment system. Needless to say, blockchain will create a transformative impact on how cross-border payments are conducted, augmenting and reshaping entire financial infrastructures of countries.