If the COVID-19 pandemic taught us anything about payments, speed, reliability, and on-demand access to money are vital in a world that is shaped by digital interaction. Our world may be forever changed, but with that change there is the potential to optimize better ways of doing everyday tasks – including making payments.
Given the current economic landscape, we recently discovered that instant, real-time payments are more important than ever. And there is a logical extension of that view that focuses on the growing need and demand for affordable and instant cross-border payments.
Solving the obvious shortcomings of current cross-border payments is a challenge that needs to be addressed. Cross-border payments, currently hampered by outdated systems and the lack of universal protocols and regulations, are far more onerous than they should be for the end user.
Fortunately, this tide seems to be changing. Powerful new technologies, built on blockchain and armed with digital assets, are catalyzing a profound shift in the way money moves around the world, with the potential to unlock huge benefits for individuals and businesses as societies move Digitize further worldwide.
A snapshot of today’s cross-border payments landscape
If you’ve ever had to send money overseas, you know exactly how frustrating the process can be. To say that the current cross-border payments infrastructure is broken would be an understatement. It’s a very slow and expensive process – and you often don’t know if or when your money will even arrive. This is in stark contrast to the digital services that we not only expect today, but that we rely on more than ever.
Sending global cross-border payments should be easy, seamless, instant, and inexpensive. However, the underlying systems, protocols and liquidity management models on which cross-border payments are based are complex, restrictive and fragmented. This means costly delays and high transfer fees for the end user. Solving these problems is important for people and businesses worldwide, and especially important for cash flows to low and middle income countries like Mexico, which would benefit most from instant, low-cost payments.
Countries and financial networks that adhere to different standards are one of the main drivers of this fragmented landscape. The result is hundreds of closed networks that do not speak to each other and are loosely connected with unstructured payment messages that require a great deal of manual intervention. All of these contribute to a poor payment experience.
Solving the cross-border payment problem with RippleNet and ISO
To counteract this, the International Standards Organization (ISO) has defined ISO 20022 as a universal standard to harmonize existing payment infrastructures. However, without a fundamental overhaul of these payment infrastructures, ISO standardization can only go so far.
To really change the paradigm and create the kind of cross-border payment services that people and businesses need, modern technology must be applied to the payment problem to complement the achievements of ISO standards.
Ripple’s vision is to achieve this technology transformation by building a new global payments network called RippleNet, which is based on Distributed Ledger technology and is closely linked to ISO standards. As a result, Ripple has been a leading proponent of ISO 20022 and its mission to enable better global interoperability and an improved customer experience for payments.
As the de facto global data standard for modern payment messages between financial institutions and payment systems, ISO 20022 is currently being adopted in 70 countries. It is estimated that 87% of global financial transactions will be supported by ISO 20022 by 2023. This common language helps financial institutions, banks and payment systems streamline the processing of cross-border payments and strengthen regulatory controls.
With the increasing adoption of ISO 20022 combined with the new approach enabled with RippleNet’s distributed ledger technology, we can better shape the future of cross-border payments.
The banks and financial institutions joining RippleNet are catalyzing the adoption of ISO20022 standards and helping bring cross-border payment methods to the modern world, providing a truly seamless experience for referrers, small businesses and emerging digital marketplaces worldwide.