What are cross-border payments?
The term cross-border payment is used when a transaction takes place between banks or institutions in two different countries and the parties to the transaction use different currencies. In this case, the parties must complete a currency exchange to complete the payment. The fintech solution to facilitate cross-border transactions, reduce or eliminate transaction fees, and prevent losses from currency fluctuations is the use of blockchain.
Now the question is: What role does blockchain play in cross-border payments?
In answer to this question, it should be said: By using blockchain, institutions can instantly share payment information with each other and immediately execute a successful transaction without errors. The good news is that all this is done with lower transaction fees. Simply put, blockchain improves the cross-border payment experience for everyone.
By distributing data across an infinite number of bank ledgers, blockchain technology has the potential to enable secure transfers of funds in cross-border payments. This capability has the advantage of bypassing banking intermediaries for individuals, and by leveraging this potential, individuals will be able to execute a transaction directly and instantly. Blockchain enables cross-border payments by providing secure, fast, cost-effective and transparent transactions that can be viewed anywhere in the world.
An example of cross-border payments
There are several Indian banks that have taken the help of blockchain technology to improve their customers’ payment experience. For example, last year, YES BANK signed a partnership agreement with Ripple to help facilitate inbound remittances from North America, the Middle East and the UK.
Apart from this, blockchain technology has brought many benefits on a human level to the people of India. For example, suppose an Indian national living in Dubai urgently needs to transfer money to his family’s bank account to pay for emergency services in India. In this example, if the bank uses blockchain technology, the remittance transfer can be completed in just a few minutes, and the transaction fees will be significantly lower than current money transfer methods. If traditional cross-border payment methods are used, the funds will take between 3-4 days to be deposited, and the funds will be deposited into the account through multiple intermediaries and after deducting additional fees.
