International payment? Cross-border payment? Foreign money transfer? As Shakespeare wrote, “A rose by any other name.”
Banks can’t be bothered with the naming of this process. And they make no distinction between domestic and international payments.
So why don’t banks distinguish international from domestic transfers?
Global markets have expanded how organizations and consumers do business. And those transactions are happening at a faster pace. Said another way, international payments are becoming as prevalent (by the number of transactions) as domestic payments.
This newfound frequency in international transactions has been driven by:
- Businesses and consumers are purchasing from more countries
- Outsourcing, which has triggered (foreign) in-country and intracompany transactions
- Growth in overseas labor
- Multinational companies are participating in complex supply chains
International payments are inherently inefficient because they are routed through multiple banks to reach their final destination. This is because there’s no single global payments system.
Aside from the inefficiencies plaguing international money transfers, Dr. Yoon S. Park, Professor of International Business at George Washington University, addresses additional challenges those payments must overcome:
- Adherence to local laws and accounting practices of the foreign country
- Detached foreign and international accounts results in siloed financial data
Enter the blockchain (also referred to as the distributed ledger). As Narseen Quibria reports in American Banker:
“The blockchain offers an entirely new approach. The blockchain faces no geographical borders and can reach any area with internet access. Without middlemen, the fees, transactions times and opacity that have plagued legacy cross-border payments can become a thing of the past.”
Banks haven’t been skittish in their embrace of the blockchain. In fact, a consortium of leading banks has emerged to implement this new disruptive technology.
Perhaps, then, the blockchain will be that single global payments platform for international payments in the very near future.
About the AuthorFollow on Linkedin Visit Website More Content by Chris Doxey