Thanks to Blockchain Technology and OnPay
Sep 27, 2022
Businesses across the world have a payments problem.
Across the world, economic growth is built on one thing: mobility. Economies stall and businesses stagnate without fluid and unobstructed cross-border movement of goods, services, capital and people.
This is such a basic economic principle that one might expect that any unnecessary obstacles to free economic movement would have disappeared by now. But facts indicate that this is not the case. Among the biggest of all these obstacles? The archaic, cash cow-oriented, bank-based system for international money transfers and business remittances.
A SWIFT bank transfer from London to New York may take only a few days, but the same type of transfer between rural localities in India and Indonesia, for example, could take over a week. Sometimes, such transfers are not even accessible in emerging economies.
Adding insult to injury, such cross-border bank services come with steep fees and transaction costs that are often prohibitive for small businesses or individuals. Case in point: International organizations such as the World Bank monitor the charges incurred for personal transfers, which go through exactly the same payment channels as B2B transfers between enterprises. According to the World Bank, in 2022 the average price of an international remittance was about 6% of the sum transferred. In fact, the fees charged by the incumbents when the transfer involves a country within the developing world are often much higher.
McKinsey forecasts that annual cross-border payments are projected to reach $2.5 trillion in 2025. If one takes the World Bank’s average rate of 6% and applies it to McKinsey’s projections, the fees are a daunting $150 billion. This tells everything one needs to know about just how much the traditional cross-border payments system drains from the lifeblood of businesses across the world that need it the most.