What are cross-border payments, and how do they work?

Cross-border payments using blockchain technology offer several advantages, including faster settlement times, access to newer markets, lower costs, increased security and greater transparency compared to traditional payment methods.

Cross-border payments offer several advantages over traditional international bank financial transfers:

• Near real-time processing: Today, blockchain cross-border transactions have four to six seconds of the average velocity of money on a 24/7 basis and without intermediaries. 
• Low-cost: Removal of intermediaries and better scaling solutions have allowed for transaction costs to be drastically reduced on blockchain transfers. However, gas fees vary as per demand and supply and market dynamics. 
• Automated record-keeping: The immutable blockchain ledger technology enables transparency and verifiable records as all payment transactions and relevant data are automatically timestamped and recorded.
• Secure: Public-private cryptography, data hashing, multi-party authorization and fraud detection smart-contract enablers provide security in cross-border transactions.

These advantages help not just multinational corporations but also small businesses and individuals engaging in global payments. Let’s say Alice, a small fashion boutique owner in Sri Lanka, wants to send money to her merchant partner Bob, who lives in Canada. 

Traditionally, Alice would have to go through a bank or other financial institution to make this transaction, which could involve high fees and a long processing time. However, if Alice and Bob both have cryptocurrency wallets, they could use a blockchain-based payment system to transfer funds directly between each other. 

This cross-border payment using blockchain could be completed in a matter of minutes, rather than days or weeks like traditional bank transfers. Plus, the transaction cost for Alice would likely be much lower than what a bank would charge. However, given the crypto market volatility, the exchange prices, liquidity and gas fees may shoot upward.