Cross-border transaction using blockchain

Globalization has pushed trade leaps and bounds and with-it worldwide fund remittance grew manifold, which was earlier limited in nature. There have been talks to reduce the remittance fees and make cross-border transactions easy with minimal delays. Consumers around the world have been looking for an alternative that would provide cheaper and faster digital payment mechanisms across the world and blockchain technology comes in as a game changer. 

Here in this article, we will know how blockchain is being used for cross-border transactions and how it works. 

How does cross-border payments work?

Globally bank transfers are much costlier than a remittance, as they work by their associates across borders. There are multiple examples of such credit unions and financial institutions functioning through a global messaging system, SWIFT is an excellent example of such a remittance system. Generally, traditional cross-border payment systems act as a payment gateway that redirects transactions through word of code languages. 

To begin with, users need to sign-up with them to send or receive funds, but a thing to mention is that there needs to be more scope for traceability in traditional systems. Apart from that, the involvement of numerous third parties like mediator banks makes it more costly in the form of value-added taxes and other miscellaneous fees. 

Features that make blockchain a preferred medium for cross-border payments 

Blockchains have become a preferred choice for cross-border payment mechanisms due to their innate qualities: 

• Immutability of information 
• Decentralized nature makes no single-point failure 
• Realization of payment in real-time 
• Absence of third-party intermediaries  

How blockchain-based cross-border transactions are transforming our lives

Like in traditional payment mechanisms, the real players are payment gateways and the banks, but in blockchain-led space, there are no such intermediaries. So, a person living in any corner of the world can send funds to another corner by converting fiat money into some type of cryptocurrency which can be safely kept in a crypto wallet. To begin with, the user needs to open up an account by signing in and initiating a transfer from the bank in doing all this he needs just the address of the fund receiver’s wallet, and, the transaction gets completed. Finally, all this gets done without worrying about various geo-political restrictions, and it’s upon the receiver whether he wants to convert it into fiat money again or not. 

Currently, there are some mainstream companies working on utilizing the blockchain-based infrastructure as a pilot project for fund transfer. There have been made certain changes in the front end for ease of use, but the core features of blockchain like immutability and decentralization remain the same. Certain governments across the world are now steadily working with blockchain developers to tweak their fund dispersal mechanism while following the legal frameworks. 

Conclusion 

Blockchain-based cross-border transactions are increasingly becoming popular but, as of now traditional financial institutions like banks aren’t really ready to accept cryptocurrency dealings due to their highly volatile nature. This has come to the fore as one of the greatest challenges in the growth of blockchain-based cross-border transactions, but a senior blockchain expert at Rejolut says there is a silver lining as the fintech giant SWIFT has partnered with the Ripple network to work on it. 

Now, this can be a technological breakthrough, as once it works several banks and financial institutions will emulate the model to become part of this new revolution in the field of fund transfer.