FinTechBlockchainBlockchain to deliver faster, cheaper and less complex cross-border payments

Blockchain to deliver faster, cheaper and less complex cross-border payments

Digitalisation of cross-border payment networks, and the use of cloud-based tools, APIs and blockchain will boost B2B cross-border transactions

According to research, B2B cross-border payments will become faster, cheaper and less complex; driven by network innovation.

The digitalisation of cross-border payment networks, aligned with the use of cloud-based tools, APIs and blockchain, will enable the replacement of bilateral networks with multilateral models; improving efficiency and reducing costs, the study from Juniper Research. Its study found that 14 billion B2B cross-border transactions will be processed by 2023; rising from 13.5 billion in 2019, a 7% increase. This will be driven by the introduction of blockchain-based payment networks.

Lack of automation and integration

Poor visibility on foreign exchange histories, positions and hedging strategies is a challenge for treasurers.

Considering the high volatility of currency exchange rates, lack of planning between the parties involved (suppliers and other corporations) may result in operations performed at times of unfavourable exchange rates, potentially resulting in a shortfall in anticipated revenues.

Even though most B2B transactions are still domestic,  there is a considerable gap between the payment options businesses offer to their customers (B2C) and the options they use to pay other business (B2B). While customers are presented with real-time payment options, most business still rely on paper cheques as a standard payment method. The input of data is mostly manual, resulting in errors and time wasted.

The lack of automation and integration across backoffice platforms is hurting cross-border payments. Perhaps, blockchain can provide the much needed window for coping up with the challenges.

Opportunity for innovation

Most international B2B transactions are still made via traditional, bilateral methods due to legacy infrastructure, which results in slow, non-traceable and expensive transactions. The lack of transparency inherent in these systems allows intermediate banks and non-banking institutions to charge high exchange rates and additional fees.

As blockchain affords complete traceability of transactions, its introduction would increase transparency, improve standardisation and reduce errors. The research recommended that payment network providers must invest in blockchain to ensure future competitiveness.

Research author Maite Bezerra said: “Future growth in B2B cross-border transactions will be driven by innovative corporate payment solutions that make transparency central to their models, following the example set by disruptive vendors in the consumer money transfer market.”

Technology and B2B transactions

According to the report, the B2B transactions segment is underserved when it comes to technology. Blockchain technology can deliver effective, low-cost products to product within a relatively short timeframe for B2B transactions.

The traditional banks have been resistant  to investing in new technologies in the B2B payment sector. But  non-bank companies using technologies like blockchain have spiced up the competition by being able to offer cheaper services and reducing the need for intermediaries.

This process of digitisation has been reactive rather than proactive, beginning with the ISO 20022, published in 2015, which is an international standard designed to simplify global business.

In April 2019 SWIFT assembled a Cross-Border Payments and Reporting Plus (CBPR+) group – the first working group of international payments experts – to create a common end-to-end implementation of the ISO 20022 for cross-border payments.

Download the whitepaper – B2B Payments Beyond Banking ~ The $14 Trillion Prize here.

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