Cross Border Payments For e-commerce. Are We on The Brink of a Revolution?

April 2, 2019

When it comes to blockchain, one of the industries that it can transform that is always mentioned is cross border payments. What’s more, blockchain is regularly regarded as a revolutionary technology for international money transfers. However, all this talk is about the private sector and while it is unboundedly rightful, what about businesses?

Today we will take a look at how blockchain can revolutionize e-commerce by creating an accessible cross-border payments ecosystem and more.

Difficulties of cross border payments for businesses

First of all, international money transfers take ages. According to McKinsey research and analysis from 2015, average cross border transaction requires three to five business days for clearing and those numbers today may even be considered optimistic. In a world where time is money, such significant delays may mean losses that are just as significant, keeping several merchants away from transacting with suppliers located in another geography.

On top of that, businesses get to deal with exchange rates and various fees associated with cross border payments that can take up 2-3 percent of a total purchase amount. For some niches that price is too much to pay, making some merchants drop the idea of utilizing cross border transactions altogether.

How cryptocurrencies can solve these problems

This is where blockchain and cryptocurrencies can truly shine – after all, when it comes to crypto there is no such concept as “borders”. Every cryptocurrency is borderless in its nature and it doesn’t really matter whether a business is sending payment to cover order from a supplier situated next door, or located on the other side of the planet.

Clearance time is also significantly reduced with transactions in the slowest traditional blockchain usually taking hours, not days, while more technologically advanced new generation distributed networks can process and clear payments within minutes or even seconds. What’s more, most blockchains offer fixed fees that are affordable even for individuals. We are talking a couple of dollars for a transaction, never hundreds or thousands.

In addition, blockchain would stop the problem of fraudulent chargebacks, when a customer files a complaint to reverse the transaction despite getting the item from a retailer. Given that the transaction is handled by a bank, a centralized party often makes decisions in favor of the customer without properly investigating the case. Blockchain would allow solving this problem entirely by putting control into the hands of the retailer and removing intermediaries. And, in the future smart contracts could be employed to make the process completely trustless.

How blockchain can change the cross border retail forever

With all the difficulties associated with cross border transactions today, only medium and large scale retailers can afford to host operations on a large enough scale to justify potential losses. Therefore, we see mostly giants like Amazon that support cross border retail and even they are limited to a fairly thin selection of countries.

Being able to eliminate a whole host of problems, when more retailers and suppliers start utilizing blockchain based payments solutions, even small operations will gain the ability to losslessly support cross border payments. Which would mean two main things:

1– retailer will be able to transact with other business from all over the world and dramatically extend their lineups, and

2– customers will be less limited in the choice of products based on the geographical location of the seller. Together these two factors mean that the international retail and shopping community won’t be segmented based on geography anymore.

Small business will gain access to new audiences from other countries while customers will be able to gain access to much wider lineups of products. While in some countries such an improvement of life may not reach outside of the boundaries of simple convenience, in some developing states where availability of certain products, such as quality drugs may be severely limited, this improvement is needed vitally.

A quick summary

Embracing new technology, especially when it’s as transformative as blockchain, is not an easy task, but it’s one that the retail industry truly needs. Usage of cryptocurrency for cross border payments will not only help businesses develop but change the very way of life of people. We believe, that it’s only a matter of time when business across the world understand the benefits of this technology and embrace it completely.

By Andrew Zimine, Exscudo CEO.

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