Using Blockchain to Make Cross-Border Payment

CANADA – Jon Dela Cruz – The use of the blockchain technology for overseas money transfers limited to startups until now, but it appears that banks don’t want to be left out of the race either.



Crédit Agricole, a French bank, through an announcement in January 2018, mentioned it will start using Ripple’s blockchain technology on a trial basis. This is so it may improve the efficiency of money transfers for customers who live in close proximity to the Swiss border. These transfers usually take up to three working days to process. With the new collaboration, they will take no more than a few minutes.


Customers can avail of this service using smartphones and they can make real-time bank-to-bank transfers in local currencies. These time-stamped records, as is the case with all things blockchain, cannot be falsified.



The FinTech Effect

Banks and high-street brokers dominated the overseas money transfer industry until the turn of the last century, when technological advances led to the arrival of several FinTech companies. Now, if you compare FinTech companies such as TransferWise and WorldRemit with older players such as and Western Union and MoneyGram, you will notice that the former score over than the latter across different parameters. With FinTech entering this realm, sending money overseas has become more cost-effective and quicker.


The Blockchain Effect

If you use the services of a FinTech company to send money overseas, you lose money in the process of converting currencies. According to the World Bank, people still pay an average of 7.09% of the amount they transfer as fees in different forms. This is mainly because of banks that handle these transactions at both ends.


If you use blockchain you can easily eliminate banks from the picture, and it will lead to an even more cost-effective method to send money overseas. Besides, the digital and decentralized nature of cryptocurrencies such as Bitcoin, Peercoin, and Ethereum makes them perfectly well suited for making and receiving international payments. Blockchain also holds the potential to streamline and simplify the Know Your Customer (KYC) process.


Who Will it Benefit

In 2016, around US $429 billion made its way to third-world countries in the form of remittances. Many people who end up receiving these payments remain unbanked, although most have access to mobile phones. Notable populations of unbanked people still exist in parts of Asia, Africa, and South America. With blockchain simplifying how people can make and receive cross-border payments, the unbanked population that depends on receiving money from others countries is set to benefit.


Given that blockchain technology will make overseas money transfers more cost-effective and secure, its use will also find growing acceptance the world over.



Is it Safe?

Companies that let you transfer money using blockchain technology rely on the same encryption levels to keep your information secure as banks and FinTech companies. However, since banks and typical money transfer companies work in a centralized manner, they remain vulnerable to hacking. This is not the case with companies that use the decentralized blockchain technology, where entries in the digital ledger remain tamper-proof.


The New Entrants

While several startups are looking at using blockchain technology to facilitate overseas money transfers, it does not look like the older players are in a hurry to adapt to this technology or integrate it in their existing offerings. Some of the new companies that are using blockchain to simplify how cross-border payments are made include:



The peer-to-peer overseas money transfer system that the blockchain technology depends on eliminates the need for middlemen in the form of banks. Its growing popularity is partly because of its decentralized nature and in part because of its cost-effectiveness. The future will only see a further rise in the use of blockchain technology to make and receive cross-border payments.


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