Making a Difference across the Payments Landscape

A Little Bit of Money

Thought Experiments on Cross-Border Payments - Of Couriers, Bankers, and Bitcoiners

Series 30: Making a Difference across the Payments Landscape

Tracing Parcels is a Click Away but Tracing Bank Transfers is an Alien Concept

The daily routine of cross-border bank transfers is anything but user-friendly. If you want to track your transfer at your bank, it is expensive, and it may take weeks, which totally defeats the purpose. In reality, long processing times and high fees dominate the international money transfer landscape. Fees, transaction times, and opacity that are still considered business-as-usual for the traditional cross-border payments system are stifling, especially for small- and medium-sized businesses that operate on an international level. 

You Can Trace Parcels and Planes Live but not so fast with Bank Transfers

Today’s consumers can easily look up their e-commerce shopping orders online. Quickly putting a trace on a parcel in transit through the courier service is nothing special anymore. One can even trace airplanes from their smartphones nowadays. For bank transfers, getting to know the status of an incoming or outgoing payment is still an alien concept. Payers and payees are forced to wait until funds appear, and nobody knows exactly with which corresponding bank the money hovers around once it is in transit.

Real-Time Trading and Instant Global Payments 

International bank transfers move under the radar from one SWIFT-member’s bank to the next. Often times at the speed of snail mail while the global financial system has real-time financial markets at its fingertips. Currency rates and stock prices race across our screens endlessly. Tracking stocks is a breeze and works with a click of a mouse. Card payments are done within a fraction of a second. Traveling without cash in your pocket has become easy – just use your credit or debit card wherever you are. The days of traveler's checks are over. However, when you look at the features international bank transfers, it`s like we are still in the 90s of the last century. 

Trading Trillions in Milliseconds, Wiring Funds in Days

Today, the financial economy benefits from superior technology with payments in milliseconds while a good portion of the real economy operates with age-old payment systems. Especially in emerging countries, cross-border banks transfers by regular businesses still take days. As a merchant in the West that sells goods and services international, you have the option to switch to cards acceptance, however, faster payments come with higher processing fees because acquiring banks charge around 3% for processing. Slow global bank transfers accelerates the imbalance between financial markets and the real economy. A recent United Nations report stated that restructuring the global financial system is needed to serve the real economy in a more beneficial way.

To be continued. Further Reading:

United Nations General Assembly. International financial system and development: Report of the Secretary-General, 69th Session, July 2014.  

E. Androulaki et al. “Evaluating User Privacy in Bitcoin.” In Financial Cryptography and Data Security: 17th International Conference, FC 2013, Okinawa, Japan, April 1-5, 2013, Revised Selected Papers, pages 34-51, 2013.

T. Moore and N. Christin. “Beware the Middleman: Empirical Analysis of Bitcoin Exchange Risk.” In Financial Cryptography and Data Security, vol. 7859, pages 25–33, 2013.




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