Swiss financial giant UBS is the latest bank to launch a blockchain-based solution designed to facilitate cross-border payments. With the persistent delays and other challenges associated with international transactions, the financial landscape is evolving to one where individuals can easily move money worldwide.
Blockchain’s potential to reduce fraud, lower transaction costs, and increase transparency is particularly beneficial for cross-border payments. Its transactions address many longstanding challenges in payments and help democratize access, making international transactions more accessible to the underbanked.
By speeding up transactions, blockchain also has the potential to greatly reduce the impact of currency fluctuations, providing stability for businesses and individuals engaging in cross-border transactions.
“If you have a 24-hour window to complete a transaction, that’s when you can really see the negative effects of currency fluctuation,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “But instant payments can clear and settle within 20 seconds. At the point when you hit the button, you can almost pinpoint with that exact currency what the exchange rate is going to be.”
Blockchain is often seen as a way to deliver these services on a widespread scale. Approximately 63% of consumers have already used instant payments systems to send funds across borders to friends and family, according to a report by GlobalData. Merchants can receive blockchain payments from around the world—without the need for bank intervention.
“Let’s take the example of a necklace maker in Bali that doesn’t have a bank account but probably has a phone,” Bodine said. “That smart device could receive a payment made through blockchain technology. It enables small businesses to act like Fortune 500 companies and extend their supply chain throughout the world.”
The UBS Structure
UBS Digital Cash operates on a private blockchain network accessible only to permissioned clients. Settlements are executed through smart contracts, which automatically process payments once predefined conditions are met. Client transfers on UBS’ platform are recorded and processed in a digital ledger—independent of currency, in near real-time, 24/7. UBS reports that it has already completed international transactions in dollars, Swiss francs, euros, and Chinese renminbi.
Other multinational banks have made ventured into this territory. In 2020, JP Morgan launched JPM Coin, which was rebranded as Kinexys Digital Payments earlier this week. Citi Token Services and DBS Token Services both went live earlier this year.
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