A Blockchain Solution for Cross-Border Payments

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A blockchain can be described as a network of computers that is used to digitally and immutably record transactions. Digital currencies, also referred to as tokens, can be used on blockchain to make payments. Blockchain has the potential to facilitate cross-border payments, as well as trace all transactions. This is an admirable property, especially since the rise of know-your-customer (KYC), counter financing of terrorism (CFT), and anti-money laundering (AML) requirements have been cited by many banks as the primary reason for them terminating their correspondent banking relationships (CBRs). The main objective of the research paper is to explain how blockchain can be used to facilitate cross-border payments. Banks and money transfer organizations (MTOs) can adopt blockchain and distributed ledger technology (DLT) to enable cross-border payments. The most practical option would be to take the route of using a Payment as a service (Paas) provider and outsource the payment services. The Paas provider’s application processing unit (API) can be integrated with the financial institutions payment systems. Therefore, when a payer attempts to may a cross-border payment, on the bank end, the API will contact the Paas’ server to initiate the transaction.The payer’s local currency will be converted to a token, then transferred across the blockchain to the payee’s bank. The token will then be converted to the payee’s local currency, and deposited in the payee’s bank account. This entire process will take a few minutes in contrast to the traditional CBR cross-border payment process that takes 5 days or more.