We live in a world where we can get groceries delivered to our doorsteps in minutes, but transferring money to another country can take weeks or months. Because even today, we are using legacy systems for transferring money. International bank transfers are not just time-consuming but also cost more and are unreliable.
It’s time to leave behind traditional payment systems and embrace cryptocurrencies. You can transfer millions of dollars to any part of the world almost instantly via Blockchain — the technology that powers crypto transactions. Virtual currencies circumvent all the existing challenges with traditional payment methods and can help merchants streamline global transfers.
In this blog, we will understand how cross-border payments work, the challenges associated with them, and how merchants can streamline global payments with crypto.
The total value of cross-border payments is estimated to cross $250 trillion by 2027 — a $100 trillion increase in just a decade. A few key factors responsible for the growing number of international transactions include digitization, rising internet penetration, and rapid adoption of mobile payments, among others.
Cross-border payments are generally more complex than domestic transactions for a few reasons:
According to a report from Oliver Wyman, “Global corporates move nearly $23.5 trillion across countries annually, equivalent to about 25% of global GDP.” Such payments incur transaction costs of over $120 billion per annum — excluding FX costs and additional hidden costs arising from trapped liquidity and delayed settlements.
With increasing globalization, easy access to the internet, and lower entry barriers, online commerce is expected to grow steadily and surpass $8 trillion by 2027. Businesses and merchants will need efficient systems to move money from one country to another. Let’s look at their existing payment options and challenges with them.
In 2022, about 49% of global eCommerce transactions were made via digital wallets, 20% via credit cards, followed by other payment methods like debit cards, account-to-account transfers, and buy now pay later (BNPL) — according to a study by FIS Global.
There are several problems with existing payment options. They are not only expensive but also can take days or weeks to settle. That’s not all. International payments are more susceptible to scams and can be halted anytime, causing friction, delays, and a suboptimal experience for everyone involved.
Consumers and businesses need an efficient way to move money from one country to another. If banks and other financial institutions cannot help, it’s time to help ourselves by embracing cryptocurrencies. Let’s understand how virtual currencies can make international transactions easy, efficient, and cost-effective.
Cryptocurrencies make international transfers faster, easier, and cheaper — all while ensuring they are 100% secure and anonymous. To send and receive international payments, all you need is a merchant account with any crypto payment processor like Speed and access to the internet. Let’s see how cryptocurrencies can help you streamline cross-border payments.
If you transact via traditional payment methods, currency conversion can erode a significant chunk of your payment. Conversion rates are not as straightforward as other charges. Credit card companies and banks often impose foreign transaction fees on top of conversion and processing charges — making transactions expensive and complex.
On the other hand, crypto payments are simple and straightforward. There are no exchange fees whatsoever. You can send and receive crypto payments from anywhere around the world without any conversion or foreign transaction fees.
Traditional payment gateways route money through several intermediaries before it reaches your account. A single transaction can include four or more payment bodies: first, it’s the issuing bank, payment processor, receiving bank, credit card companies, and the customer themselves. When so many entities are involved in a single transaction, the chances of something going wrong multiply.
Cryptocurrencies can solve this. All the payments made via crypto are direct and peer-to-peer. There are no intermediaries involved in cross-border payments, making them faster, more efficient, and dictatorship-free. No one can freeze your funds or reverse a transaction at any point. This makes cryptocurrencies ideal for international transfers.
Credit card companies charge a foreign transaction fee of up to 3% on top of existing payment processing charges for every international payment. Banks, too, have unreasonably high exchange rates, making foreign transactions expensive and unfavorable. A Remittance Prices Worldwide report reveals the global average cost for sending remittances was 6.30% in 2021. A few methods can even cost up to 10% of your transaction value. This means if your monthly volume is $4412, which is the average revenue for all sole proprietorship eCommerce businesses in the U.S., you will be paying almost $500 in transaction fees.
However, when you transact in cryptocurrencies, all you pay is a network fee — which is a tiny fraction of your payment. The average transaction fee for transferring Bitcoins (a leading cryptocurrency) is 0.000044 BTC, or $0.957.
In 2021, a transaction worth $2 billion was processed for a fee of only 0.00001713 BTC. That’s just $0.78.
If you had to receive $2 billion via credit cards or banks, it would cost you 200 million dollars, not to mention the weeks of processing time, regulatory limitations, and other concerns influencing your transaction.
According to a report from Boston Consulting Group, financial firms are 300 times more likely than other firms to experience cyberattacks. In 2015, the Carbanak cyber gang stole $1bn from 100 financial institutions worldwide — making it one of the biggest financial cyberattacks of the century. Bottom line: banks are not the safest place to keep our money.
On the flip side, cryptocurrency offers higher security and transparency for international transactions. All the payments are secured by cryptography. Meaning they cannot be tempered or reversed without the owner’s authorization. What’s more, all the payments are also recorded on Blockchain — a publicly distributed ledger that’s shared across everyone on the network. Thus, you can trace all the transactions to their origin — making payments transparent and safe for everyone.
Transfers made via traditional payment gateways can take days or weeks to settle. That’s primarily because there are several intermediaries involved in a single transaction. If any one of the intermediaries ‘feel’ the transaction is unauthorized or has other security concerns, they will reject the payment. This is frustrating for companies as it hampers their cash flow and overall revenues.
Crypto transactions are instant and irrevocable. You can transfer any amount of money anywhere in the world in a matter of minutes. It can achieve this speed by eliminating all the middlemen from a transaction. This means you can send and receive money 365 days a year. Your payments won’t be halted due to bank holidays or delays caused by third parties.
Crypto’s efficiency and wide accessibility make international transfers seamless and flexible. Businesses can send and receive payments in multiple currencies, such as Bitcoin, Tether, Ethereum, or even stablecoins, without having to go through complex bank procedures.
That’s not all. Crypto also facilitates micro-transactions — unlike other financial institutions. Bitcoin, a leading cryptocurrency, supports payments as small as 1 satoshi (nearly equivalent to $0.000262). Enabling fractional payments helps small to medium-sized businesses transact globally while reducing the risk of overpayment or underpayment.
Unlike traditional payment methods, onboarding a crypto payment gateway is relatively easy and requires minimal documentation. You can get started with a crypto payment processor in just a few clicks. All you need is a valid email address and access to the internet to get things moving.
What’s more, most platforms offer ready-made crypto payment plugins for eCommerce that allow users to enable crypto payments into their stores in a matter of minutes. You can also use developer-friendly APIs to integrate the payment gateway into your platform.
Cryptocurrency is breaking barriers to international transactions every passing day. Eventually, it will take over all the existing payment methods, making global payments faster, cheaper, and more transparent.
The future for crypto payments looks brighter. With its cutting-edge features, Blockchain technology will continue to disrupt the traditional financial industry, offering businesses more flexibility and transparency in their cross-border transactions.
If you frequently send and receive money internationally, embracing cryptocurrencies will not only cost less but also make your payments seamless and efficient. Sign up with Speed today and start accepting crypto payments in real-time.