Commerce has always been a pillar stone of civilization as we know it. It brings in wealth, establishes connections between the parties, helps culture spread and “be contracted”, the income generated nourishes artists, writers, athletes, scholars who do their own part in the founding of civilizations.
As commerce inevitably extended its reach all over the globe with the advent of both transportation and electronics innovations, the availability and the speed of payments became more of an issue. Cross border payments are those of which buyers and sellers or senders and recipients are located in different countries. These kinds of payments, in its conventional sense, incur penalties to the speed of transfer, taxing costs, service costs etc.
How to Make Cross Border Money Transfers
To better understand the issues at hand let’s revisit the methods in place for cross border money transfer.
- Wire Transfer: “Wiring” is a term for the most conventional method of money transfer where banks are involved in conducting such a process. While domestic wiring is also called bank wires, as it moves across borders it could also be known as remittance. Remittance requires banks at two terminals to clear the transfer which requires time, sometimes as long as a week, service charges, taxes, conversion charges and others, making the transfer quite troublesome and costly.
- Payment Service Providers: This type of transfer is comparably preferred by individuals more, looking to send or receive in the form of cross border payments. The sender visits the PSP’s Office with the cash and proof of his identity and after deduction of charges, the recipient collects the Money from the PSP’s office located in the destination country.
Thanks to the advent of internet and fintech companies, though, cross border payment types claimed its fair share of innovation that mitigated both transfer delays and costs considerably.
What are the Cross Border Payment Types?
Cross border payment methods which are relatively younger, hence being younger include Visa Direct, MasterCard Send, Swift GPI, credit and forex cards along with digital wallets.
The masters of the cards universe, VISA and MasterCard both offer push payments that omit banking networks, effectively decreasing the transfer speeds and costs. Credit cards are almost anybody’s acquaintance: They provide instant access to a month-long loan depending on your overall limit that also may offer payment postponement, coupons, loyalty points as unique perks. Swift is the network banks use for cross border money transfer, yet they even came up with their Global Payment Initiative for a faster and more transparent experience. Wallets that store your information in digital format are available in mobile formats as well, making it possible to use your mobile phone as a means of payment abroad. We also got the forex card that deploys fixed rates without having to worry about converting your local currency as you travel the globe.
The future of cross border payments lies mostly with blockchain technologies, apparently. One of the heavyweights, despite plunging into a trifle with SEC last year, Ripple is originally invented to become a lightning-fast and cheap-as-air alternative to SWIFT, by receiving any fiat currency and converting it to XRP, its own token and carrying it over the nodes to the recipient bank’s terminal where it is conclusively converted into the local currency, disabling all costs and transfer delays in between.
Ripple is not the only contender as cross border payment types of the future rush down the alley of commerce. Decentralized Ledger Technology has already startled the cross border money transfer conglomerates of today and it is without question that it will topple those should they fail to adapt or embrace the “aliens” of fintech.