Show me the Money — How Blockchain is Revolutionizing Payments
If you’re a business owner and you sell products or services around the world, one of the problems you’ve likely encountered is getting paid in a timely manner. In today’s society, same day settlements are rare and usually take between 2–5 business days to process. For well-capitalized companies, waiting for a payment to settle or meeting necessary prefunding requirements may not be an issue. Prefunding is the requirement to pay in advance for transactions processed by a bank regardless of the payment due or value date (1). This can pose a challenge for undercapitalized organizations and continues to be a major pain point for those in developing countries making cross-border transactions.
Other challenges with cross-board transactions include the difficulty of tracing and predicting settlement times, high costs and lack of transparency of costs, compliance with payment service provides (PSPs), and access constraints for the unbanked who choose to send money in other ways (e-payments, mobile, digital assets, etc.).
In a traditional financial transaction there are a number of entities involved. A typical cross-border, financial transaction works as follows:
PSP →Bank →Foreign Exchange →PSP →Bank
