Cross-border payments innovations are turning global growth frictions into modern fictions.
Or, at least, they are working on it.
Ripple and Clear Junction announced Wednesday (June 5) that they partnered to bring together Clear Junction’s cross-border payments solutions and Ripple’s enterprise blockchain and crypto solutions.
Firms are increasingly exploring the potential of blockchain solutions for simplifying cross-border payment execution while capturing improved cash flow and liquidity management.
These payments have been shackled by high costs, slow settlement times, and a lack of transparency in traditional payment rails. This friction imposes a punitive burden on businesses operating in multiple markets, stifling growth and innovation. However, the maturation of blockchain technology holds promise to transform the landscape by offering a streamlined, cost-effective and secure alternative to conventional methods.
If blockchain-based cross-border payments transition from experimental to essential, it will shift how businesses transact with each other around the world.
Still, just as fiat and domestic-use payments innovations need to meet end-user expectations, cross-border settlement must align with local marketplace requirements — making compliance critical for any innovation to scale.
“There are two big things businesses want,” Boost Payment Solutions founder and CEO Dean M. Leavitt told PYMNTS in an April interview. “The first is cross-border payments mechanisms that are cost-effective and efficient in paying their suppliers abroad. That’s a clear desire on the enterprise B2B level. And the other thing is just broadly digitizing the ways in which businesses pay and get paid.”
Against that backdrop, crypto’s potential to transform existing cross-border payments workflows and modalities is becoming harder for firms seeking an operational edge to write off as they look to grow internationally.
Blockchain technology addresses the core issues plaguing traditional cross-border payments: high costs; slow processing times; and lack of transparency. By using decentralized ledgers, blockchain claims to facilitate faster, more secure and less expensive transactions. The shift is particularly beneficial for businesses that operate across multiple markets, as it allows for quicker settlement times and reduced fees, thereby enhancing overall operational efficiency.
The Solana network processed $1.4 trillion in stablecoin cross-border payments in March alone, per CryptoSlate — a testament to the scalability of on-chain solutions for cross-border payments.
To capitalize on the advantages of blockchain technology, businesses must adopt a strategic approach. The PYMNTS Intelligence report “Can Blockchain Solve the Cross-Border Payments Puzzle?” found that there are five pillars to any actionable roadmap for businesses engaged in cross-border commerce.
See also: Solana Foundation Goes All In on Blockchain as a Mainstream Payments Rail
To use blockchain to enhance and optimize cross-border settlement, businesses can start by partnering with FinTechs to enable simplified cross-border payment processing and facilitate seamless digital-to-fiat currency conversion.
Incorporating stablecoins into a business’s payment system also provides cross-border customers with a fast, dependable and cost-effective alternative to traditional payment rails. Stablecoins can boost transaction speed and lower currency-exchange risks, making them an attractive option for international transactions.
Business-friendly permissioned decentralized finance (DeFi) solutions can also help firms automate and secure their cross-border transactions through smart contracts. These solutions diminish reliance on traditional payment rails, accelerate payment cycles, and bolster transaction security and transparency, helping firms reduce some of the risks associated with cross-border payments.
Faulty cross-border payments cost merchants in the United States at least $3.8 billion in sales last year alone, according to the PYMNTS Intelligence report “Cross-Border Sales and the Challenge of Failed Payments.”
It is also crucial for firms to educate not just themselves but their business partners about the benefits of on-chain cross-border payments. Educating end-users empowers them to use these innovative payment solutions with confidence, fostering trust and facilitating smoother transactions.
At the same time, proactively communicating with banks and financial institutions about the interest in blockchain-based cross-border payment solutions can also help to accelerate industry change. By highlighting the advantages these solutions would bring to businesses, advocacy can encourage more financial institutions to adopt and support blockchain as a next-generation cross-border payments technology.
The inefficiencies of traditional payment rails are no longer the inevitable cost of international commerce. Blockchain-based alternatives promise businesses a new chapter of secure, fast and inexpensive cross-border payments. As blockchain technology continues to evolve and gain acceptance, it will likely become the standard for international transactions, driving down costs and increasing the speed and transparency of payments.
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