Banks and companies depend significantly on cross border payments to generate revenue, but new technology might soon change this. These payments currently represent 20 percent of the total number of transactions in the payments industry and generate 50 percent of transaction-related revenues (1). In 2015, cross border payment flows totaled more than $150 trillion and the payments industry earned over $200 billion in revenue from services provided to payers and payees (2). For decades, banks and companies have employed traditional correspondent banking systems such as SWIFT, VISA, and MasterCard as means for international payments. However, the average transaction with one of these banking systems is both expensive and takes three to five business days to process (1). Luckily for customers, technology, such as mobile banking, digital wallets and e-commerce, have caused radical changes in banks’ products and their systems’ efficiencies. The rise of the distributed-ledger system, or Blockchain, upends our understanding of cross border payments and revolutionizes the current system.
Blockchain was developed in 2008 by Satoshi Nakamoto as a transaction platform for the cryptocurrency known as Bitcoin. The design of the system removes the need for a central authority while still allowing secure fund transfers.