Cross-Border Payments via Blockchain Networks

Traditional international transfers can take days and cost a lot. Blockchain-based payments, especially with stablecoins, can settle in minutes with lower fees.

How it works

• Use a stablecoin (e.g., USD-backed) to send value.
• Transfers settle on a blockchain; recipients can convert to local currency.
• Payment providers handle compliance and on/off ramps.

Simple flow

Sender loads funds (bank card/transfer) into a wallet.

Funds are converted to a stablecoin (e.g., USDC).

Stablecoin is sent on a blockchain network (minutes, low fees).

Recipient off-ramps to local currency via a licensed provider.

Payout into bank/mobile money or cash pickup.

Key roles

• Wallet/PSP: user app to hold/send stablecoins.
• On/Off-ramp: converts between fiat and stablecoin, handles KYC.
• Compliance layer: screens transactions (AML, sanctions, Travel Rule).
• FX partner: provides local currency conversion and rates.

Benefits

• Speed: Near-instant transfers.
• Cost: Lower fees vs. legacy systems.
• Transparency: Track transactions in real time.

Additional advantages

• 24/7 settlement: weekends and holidays included.
• Global reach: pay across many corridors with one rail.
• Programmability: automate invoices, escrow, and conditional payouts.

Considerations

• Regulation varies by country.
• Choose reputable stablecoins and licensed providers.
• Manage FX and conversion for recipients.

Compliance and licensing

• KYC/AML: verify senders/recipients; monitor suspicious activity.
• Sanctions screening: block prohibited addresses/entities.
• Travel Rule: share required sender/recipient info between providers.
• Local licenses: use registered partners for payout (e.g., money transmitter).

Stablecoin choices

• Fiat-backed: USDC, USDT—widely supported, predictable value.
• Bank-issued: tokens from regulated banks—strong compliance, limited reach.
• Algorithmic: avoid for payments due to stability risks.

Network options

• Ethereum (often L2s like Base/Arbitrum/Optimism): broad ecosystem.
• Solana: fast, low fees, high throughput.
• Stellar/XRP: designed for payments and remittances.
• Pick corridors your partners support and test fees/finality.

FX, fees, and finality

• FX: compare on/off-ramp rates to bank/fintech benchmarks.
• Fees: network fees (tiny) + provider fees (vary by corridor).
• Finality: once confirmed, payments are hard to reverse—use escrow for disputes.

Custody and UX

• Custodial wallets: easier onboarding; provider holds keys.
• Non-custodial: user controls keys; more responsibility.
• Recovery options: social recovery/multi-sig for safer access.

Use cases

• Business payouts: pay suppliers/contractors abroad quickly.
• Remittances: workers send money home via mobile money.
• Marketplace settlements: pay sellers across countries daily.
• Payroll: split salaries into local currency and stablecoins.

Step-by-step pilot plan

Choose one corridor (e.g., US→Mexico) and a licensed off-ramp.

Pick a stablecoin and network supported by partners.

Define limits, KYC steps, and fraud checks.

Test funding, sending, and cashing out with 10–20 transfers.

Measure speed, fees, FX, and user satisfaction.

Document operations (support scripts, exception handling).

Expand limits, add more corridors and payout methods.

What to measure (KPIs)

• Transfer time: initiation to payout (median/min/max).
• All-in cost: network + provider + FX spread vs baseline.
• Success rate: completed payouts without manual intervention.
• Compliance pass rate: % completed without extra checks.
• User satisfaction: NPS/CSAT for sender/recipient experience.

Risks and mitigations

• Stablecoin depeg: use reputable issuers; set limits/alerts.
• Address blacklisting: screen addresses; provide appeal flow.
• Regulatory changes: partner with licensed providers; update policies.
• Phishing and scams: strong UX, education, and transaction warnings.

Frequently asked questions

• Do recipients need crypto knowledge? No—off-ramps pay out in local currency.
• Are on-chain payments reversible? Generally no; use escrow and dispute processes.
• Is this legal everywhere? Regulations vary; use licensed partners and follow local rules.
• How do taxes work? Track value at send/receive; consult local tax guidance.

Quick glossary

• On/Off-ramp: Service to move between fiat money and crypto.
• Corridor: A send/receive country pair (e.g., US→India).
• Stablecoin: A crypto asset pegged to a stable value (e.g., USD).
• KYC/AML: Identity verification and anti-money-laundering checks.
• Finality: Point at which a transaction is confirmed and cannot be reversed.