Cross-border payments are essential for businesses and financial institutions. In 2024, global corporations moved $23.5 trillion across the world. But the process can be inefficient, slow, with high transaction fees, and limited transparency. These barriers can make global remittances a headache, with time and money wasted on ensuring that the process goes as smoothly as possible. This is where digital assets can come into play. How can the use of the blockchain and digital assets help institutions create a better remittance process?
Lower costs
Remittance costs can easily build up, with transaction fees, foreign exchange fees, and banking charges stacking up throughout the transfer process. Digital assets allow institutions to cut these fees significantly. By utilizing the blockchain, intermediaries can be eliminated where these fees appear. Currency conversions are easily simplified with the use of digital assets, streamlining global transfers by lowering the cost of executing them.
Faster settlements
Another advantage of utilizing digital assets is the speed and efficiency of the settlements. Traditional remittance settlements rely heavily on banks and other intermediaries that add time and money at each touchpoint. This can cause delays of days as everyone in the process adds in their own transaction times. On the other hand, digital asset transactions can happen almost instantaneously and can be settled within minutes. This means transactions can be settled successfully outside of typical banking hours, holidays, or weekends.
Greater security and transparency
Institutional remittances require a high level of safety and security, as well as traceability. Transactions need to be tracked in real-time and followed closely. With blockchain solutions, transactions are done on a transparent, immutable ledger that records every detail and movement of the transacted assets. This reduces the chances of human error, fraud, or targeted attacks.
By incorporating smart contracts, remittances can be programmed within conditional payment flows managed by institutions that trigger automatically when certain criteria are met. With technology such as smart contracts and the heightened security of the blockchain, settlements can be done more safely and with greater oversight.
Opens potential for new markets
Digital assets allow institutions to unlock new markets that may be underserved by traditional finance. Local banking infrastructure may be lacking, regulations unclear, or with even more fees and longer transaction delays. Blockchain transactions and digital assets allow businesses to access new markets, employees, partners, and customers that may not have been available previously.
Businesses continue to struggle
A recent Accenture study found that 92% of the businesses they surveyed still relied on banks as their primary cross-border payment provider, despite all of the above issues being cited as constant struggles. Incumbent banks and banking systems are bloating the global remittances processes.
Why is this the case? A lot of it has to do with trust. After all, these transactions are the kind that businesses thrive or die on, and their safety is essential for business reasons, but also for institutional trust. Making a change to any sort of new technology also brings a learning curve and cost, which is both a mental and financial barrier to adoption. As the technology becomes more ubiquitous, those barriers will lower as user education increases and incorporating the technology becomes cheaper. Even now, more and more white-label products are being created to offer solutions for institutions looking to move into digital assets. With institutions of all kinds needing fast, efficient, and secure global transfers, there is a huge potential for digital assets to revolutionize global transfers.
If you want to use the advantages of digital assets and the blockchain for your business’s global transactions, get in touch with Fideum to find out how we can help.
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