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Capturing Crypto’s Product-Market Fit in Cross-Border Payments
In a landscape defined by unprecedented events digitization and global connectivity, cross-border payments remain a paradox.
Indeed, despite the size of the total potential market – which is expected to reach a staggering 290 trillion by 2030 – cross-border payments are fraught with inefficiencies, high fees and transaction delays. A situation almost entirely due to the continuing limitations of traditional methods and existing infrastructure.
However, the proper management of cross-border payments is becoming increasingly crucial for businesses looking to expand internationally and capture growth in new markets. That’s why businesses are starting to look at other cross-border money transfer vehicles, including blockchain-based solutions that offer streamlined cross-border flows while freeing up capital previously tied up in correspondent accounts in multiple country.
After all, as long as businesses are charged foreign exchange fees, transaction and correspondent banking fees, compliance fees, as well as shipping, customs and tax fees, while ensuring that their money moves at a snail’s pace, there will be an interesting opportunity. to reduce payment costs while providing a better user experience.
And with the news that State Streetthe largest custodian bank in the world, is reconstruction its digital assets team just six months later let the staff gooptimism around cryptos product-market fit within cross-border activities, it becomes increasingly difficult to amortize for companies seeking an operational advantage.
Learn more: Seizing the $250 Trillion Cross-Border Payments Opportunity
Eliminate the friction of cross-border B2B payments
Cross-border payments inherently have more points of failure than their domestic counterparts, which is especially true for B2B payments. Compliance is a problem still presentwith local anti-money laundering (AML) policies, know your customer (KYC) policies and sanctions checks must be carried out for each individual region – and there are over 19,000 of them tax jurisdictions global.
According to a recent PYMNTS Intelligence survey, the failure rate of cross-border payments is approaching 11%, which represents $3.8 billion in lost sales in 2023 alone.
Delays and threats of fraud also create bottlenecks, while exchange rates and the long list of fees create their own obstacles. According to a separate PYMNTS Intelligence study, nearly half of Citi Bank Business customers see high costs as one of the biggest issues with cross-border payments, and 59% say the same about slow speed.
“This fundamental problem is the necessary time ” Brooks Entwistlesenior vice president of global customer success and general manager of an enterprise crypto solutions company Ripple, told PYMNTS. “As these businesses grow, there is a need to move value faster and to more places. »
In this context, cross-border solutions based on blockchain, particularly stable parts, are increasingly being adopted by businesses looking to find a better way to transact and expand internationally.
THE Solana processed network $1.4 trillion in stable currency cross-border payments just last March – a will to the scalability of technology.
See also: Interoperability and transparency are major challenges as cross-border payments modernize
Assessing the future of cross-border payments
As Jim ColassanoSenior Vice President of RTP Product Development at The exchange center (TCH), told PYMNTS, “Instant cross-border payments are the solution Holy Grail payments. »
And new PYMNTS Intelligence reveals that when it comes to cross-border payments, blockchain solutions could offer benefits compared to traditional systems. Indeed, blockchain’s high throughput, low fees, and 24-hour availability could remove much of the friction from cross-border transactions, making each one as simple as sending a Venmo payment .
Despite these promises, the path to widespread adoption of cryptocurrencies for cross-border payments is not without obstacles. Regulatory frameworks around cryptocurrencies vary significantly between countries, creating uncertainty and potential legal challenges. Central banks and financial regulators are also concerned about the potential for cryptocurrencies to facilitate money laundering and other illicit activities.
But PYMNTS Intelligence notes that there are some best practices for businesses looking to leverage blockchain to complement their cross-border payment mechanisms.
This includes partnering with a FinTech capable of simplifying cross-border payment processing and facilitating seamless conversion from digital to fiat currencies, ensuring a streamlined cross-border payment experience; integrating stablecoins into payment systems; implement permissioned, business-friendly DeFi solutions that automate and secure B2B transactions via smart contracts; and of course, to educate business customers and banks about the benefits of blockchain-based B2B payments.
After all, existing frictions in the cross-border landscape may be inevitable, but they do not have to be inevitable.
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