With respect to the rapid increase of technology in the banking system, we have seen a huge transformation in the manner at which payments and financial transactions are made across different parties or territories. Over the years, making financial payments across borders via conventional financial institutions tends to be sluggish and time-consuming, but today, with the advent of digital wallets and e-commerce, cross border payments are now made at ease through a faster and cheaper means that are based on blockchain technology. With regard to these developments, financial institutions tend to adapt to these blockchain technology in other to improve their standards.
WHAT IS BLOCKCHAIN TECHNOLOGY?
Blockchain technology is a public accessible LEDGER that enhance the safe transfer of digital assets and makes the history of these transactions irrevocable through the use of cryptographic hashing.
HOW CAN BLOCKCHAIN TECHNOLOGY POSITIVELY INFLUENCE CROSS BORDER PAYMENTS?
According to a McKinsey Research, it takes 3-5 days for financial institutions to make cross border-payments, this might be a very long time to seal up a financial deal, but with the blockchain technology, cross border payments can be made directly between two parties (within few seconds) without necessarily involving a third party. Hence, it's saves time
Secondly, blockchain technology has made across border payments to be cost effective because, since transactions can be made without the third party there will be no need to pay transfer fee to any intermediary.
Thirdly, with the use of cryptography in blockchain technology, transaction records are not trailed or altered. Hence, it can be seen as a secured means of payment.
CONCLUSION
In July 2020, Ripple’s former chief market strategist, Cory Johnson stated that bases at which these financial services operate on was designed in 1970s. Also, he described the bid to transfer funds across borders via traditional financial services as slow and risky due to currency fluctuations. According to him, Ripple uses blockchain technology in making fast and reliable cross border payments, thereby eliminating the risk of currency fluctuations (since these transactions are completed in seconds)
However, some institutions are still using the conventional methods of cross border payments, but it seems that blockchain is taking the lead since it's technology tends to be playing a vital role in the course of cross border payments and has been adopted by many financially institutions to help them provide fast, efficient, and reliable services to their clients
