Three international financial institutions are looking into the benefits of using distributed ledger technology (DLT) to improve cross-border payment processes.

Traditional cross-border payments can be expensive. While financial institutions may stand to benefit by charging fees and commissions, it tends to be the consumers, who are forced to pay these fees, that suffer. In some cases, there is also a waiting period which can be delayed if the proper documentation isn’t provided.

Disruptive technology hopes to change the status quo by making these payments peer-to-peer based and by drastically cutting fees and most of all, time. Now, it seems as if some of these institutions are hoping for the same, delivered through blockchain technology.

Transformation through Distributed Ledger Technology

According to BankingTech, the Bank of Canada (BoC), the Bank of England (BoE) and the Monetary Authority of Singapore (MAS) are investigating using blockchain technology as a potential alternative to traditional cross-border payment services. Their views are expressed in a promisingly titled report, ‘Cross-border interbank payments and settlements: Emerging opportunities for digital transformation’.

Victoria Cleland, who is the BoE’s executive director for banking, payments and financial resilience, touched on the importance of ensuring the improvement of this essential component of the financial industry:

It is important that cross-border payments, which totalled 1.8 times global GDP in 2016, are enhanced too. They are at the centre of the international financial system; enabling trade, investment and money transfers.

In addition to two more traditional payment models, the report also discusses the possibility of using distributed ledger technology (DLT) through a central bank-issued virtual currency. The latter seems to be gaining interest as seen through Venezuela’s introduction of its Petro as well as Iran and the Marshall Islands’ plans to develop their own digital currency. The aim of this model, of course, would be to improve “access, speed, and transparency of cross-border payments”.

This seems to be a tentative step for the trio as the report states that more research needs to be done.

The Future of Cross-border Payments

There are a few examples of DLT being used for cross-border payments. August saw French-based remittance service, Tempo, collaborate with Stellar to cut down on the expense and admin that is commonplace with this type of payment. Major investment company, JPMorgan Chase, is also using DLT for their remittance service and have garnered the support thereof of over 70 banks all around the world.

Just recently, Live Bitcoin News reported on how Ripple’s CEO, Brad Garlinghouse, believes that his company is already taking over SWIFT payments as more and more banks are turning to Ripple technology to give their remittance clients a better user experience.

Do you believe that more banks will be using DLT for cross-border payments come 2019? Let us know in the comments below!

Images courtesy of Pixabay and Shutterstock.

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