Revving Up the Speed of Cross-Border Payments

We’ve been conditioned to expect instant gratification with the emergence of on-demand entertainment, immediate content availability, real-time communication, and same-day delivery - except when it comes to cross-border payments. Blockchain technology is aiming to be the answer.

Nearly 10 years ago when I was living abroad, accessing my funds in the US was frustrating.

I found the need to plan days in advance to transfer money to my London bank account. Submit the request. Wait for manual authentication ONLY during banking hours. Wait 2-3 days for the transfer to complete. And if there are any issues, start the process all over again. Wait some more.

Unfortunately, the process has not changed much since then.

Cross-border payments via traditional bank transfer still typically take two to five days – a snail’s pace when compared to domestic money transfer or new peer-to-peer transfer systems like Venmo, PayPal, and Cash App.

Much of this is due to a complex international monetary system and banking infrastructure with varying interoperability and mostly decades-old, legacy technology. Not to mention currency conversion, differing time zones, involvement by myriad correspondent banks, internal bank policies and approval processes required to address compliance, government anti-money laundering sanctions and regulations and…

Yeah. I could go on as long as it takes a transatlantic transfer to go through. 

It’s complicated, but technology has solved thorny problems before. So, in this fast-paced, interconnected world, how is there not yet “an app for that?” And what technology is capable of meeting all of these (still necessary) requirements?

Enter the Blockchain

Blockchain technology is a proven disruptor – and cross-border payments is one area where it truly glimmers.

For the uninitiated, a blockchain is essentially a distributed system for recording information. Rather than depending on a single entity such as a bank to facilitate a complex process and own the ledger, blockchain technology endorses a network of computers or nodes working together to nearly instantaneously validate and transparently and permanently record transactions based on pre-defined rules, negating the need for costly intermediaries.

Blockchains also operate 24/7 and are often globally distributed, therefore not limited to “bankers’ hours” or time zones. Further, to mitigate currency fluctuations, blockchain solutions can use digital assets as a bridge currency to speed transfer and eliminate the need for pre-funded accounts on the receiving end. In this way, blockchain-enabled cross-border payments zoom past traditional money transfers, reducing processing times from days to minutes or even seconds.

Blockchain technology inherently ensures both transparency and security by recording each transaction on a tamper-resistant, immutable ledger, thus diminishing fraud risk as well.

Hurdles abound

Blockchain technology might be zipping ahead, but if you haven’t been following this space, it’s important to know it faces massive regulatory hurdles.

Globally, governments and financial authorities remain hesitant to embrace this “new” technology. And the world of cross-border payments raises international regulatory questions: payments must comply with local rules and regulations in the markets they touch, as well as international standards set by the US, EU, and international agencies (e.g., OFAC, AMLA).

In the US, the recent collapse of several regional banks and the crypto exchange FTX have put regulators on even higher alert, intensifying scrutiny and restrictions on activity considered high risk or lacking clear standards. The Federal Reserve, for example, recently released a Joint Statement on Crypto-Asset Risks to Banking Organizations and established the Novel Activities Supervision Program that significantly restricts the ability for banks to leverage new technology like blockchain.

While frameworks are evolving to support assessment by regulators, it remains a formidable challenge striking a balance between innovation and compliance for blockchain aficionados and innovators trying to bring positive change to the market.

JP Morgan Chase is attempting to do exactly that, working with regulators to approve its “digital deposit token for faster cross-border payments” using blockchain technology.

How to stay in the fast lane

Blockchain tech has broken barriers and shattered records, and it continues to push the limitations of possibility. It’s agile, quick, and dynamic, making traditional money transfers seem like a horse-drawn carriage.

But as much as blockchain technology has exposed opportunity in cross-border payments, adoption will be slow without more banks on board and improved regulatory clarity. After all, banks play a pivotal role in the financial ecosystem.

So how can banks propel cross-border payments into the fast lane using blockchain?

  1. Educate staff and customers. As in all major change management efforts, it’s important to bring stakeholders along for the ride. Just as an elite runner needs proper training to develop speed and endurance, banks must invest in communicating the benefits of and debunking myths about blockchain technology to ensure a collective readiness among both customers and colleagues to embrace this change.
  2. Develop a strategic plan. Technology is an enabler, never an end in itself. Establish clear goals to integrate blockchain capabilities as part of your bank’s comprehensive digital transformation strategy, and you’ll be equipped with a high-performance engine to stay ahead.
  3. Collaborate with regulators. Being part of the regulatory conversation will help to ensure practical, attainable principles that work in practice, not just in theory. Participate in the development of standards for blockchain-based payments in partnership with regulators and other financial institutions and industry players to advance the adoption process safely while not thwarting innovation.
  4. Begin building the technology… but don’t put your blockchain eggs in one basket. It’s crucial to pilot solutions with multiple players (e.g., Ripple, Circle, Fireblocks). With the appropriate due diligence, you’ll be able to implement a blockchain platform that is scalable, secure, compliant, and can integrate with your legacy systems.
  5. Test, learn, and innovate. Start small and celebrate change, learning, and incremental wins. You’ll build your own best practices while becoming an example of how to do it right.

Oh, and one last recommendation: hedge.

As big as the promise of blockchain is, financial institutions should continue to innovate using other technologies as well. The recent Visa-Swift collaboration is a great example of finding ways to accelerate on more traditional rails.

The Bottom Line

A transformation in cross-border payments services is already underway, and now is the time to prepare for what’s ahead. New technology is knocking down previous barriers and solving inherent issues and limitations, while the regulatory landscape evolves and more banks enter the blockchain race.

It may just be the checkered flag signaling the end of slow and unwieldly cross-border payments and the path to the instant gratification that we have all come to expect.

Banks have never seen more disruption, from unprecedented market and regulatory challenges to intense competition from fintech challengers. Further Advisory works with major financial services firms to establish transformational strategies, build new digital capabilities, and accelerate launches, all while modernizing core business operations.

About the author


  • Lindsay Wilson

    Lindsay is a seasoned program manager and proven business leader with success executing complex initiatives and delivering impact across business units and cross-functional teams.

From Strategy to Reality®

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