The Rising Importance of Cross-Border Transactions
According to a report by the World Economic Forum, cross-border transaction values are projected to reach $250 trillion by 2027, highlighting the growing significance of these operations in the global economy. Despite recent trade protectionism trends, international commerce remains a strategic necessity for business growth.
Conduit Seizes the Blockchain Opportunity
For Conduit, blockchain’s advancement presents a unique opportunity. As the technology matures, its adoption in Mexico and worldwide will continue to grow. Companies that join this transformation won’t just optimize their operations but also position themselves at the forefront of a financial revolution already underway.
“Traditional payment systems or the Society for Worldwide Interbank Financial Telecommunication (SWIFT) can take days to complete due to the numerous intermediaries involved. When a Mexican company wants to transfer funds to a supplier in China or its holding in the U.S., the money must pass through various correspondent banks before reaching its destination. This not only slows down the operation but also generates hidden costs and lack of clarity on final amounts,” explains Federico Javin, General Manager of Conduit in Latin America.
Moreover, tracking international payments isn’t always straightforward and often requires meticulous follow-up across different banking entities. Businesses relying on efficient cash management face impacts when they don’t have their capital available when needed, affecting projections and growth plans.
Blockchain: The Solution
Since its inception in 2008 as Bitcoin’s underlying technology, blockchain has evolved from a simple decentralized database to a powerful tool capable of transforming multiple industries. In finance, especially cross-border payments, blockchain is addressing issues that traditional systems have failed to overcome for decades.
Conventional banking systems, designed in another era, have structural limitations that directly affect a company’s operational efficiency. According to a McKinsey & Company report, the current international payments system can involve up to six intermediaries, resulting in wait times of up to five business days and unclear fees.
In contrast, blockchain offers concrete and tangible solutions in three key areas:
Speed
One of blockchain’s primary advantages is its ability to process transactions within minutes, regardless of origin or destination country. By eliminating the need for intermediary banks, funds transfer directly from one wallet to another, allowing businesses more agile control over their cash flow.
Transparency
Each blockchain operation is recorded in an immutable public ledger, enabling real-time verification. This level of traceability reduces the risk of fraud and eliminates uncertainty about fund journeys, a traditional blind spot in bank transfers.
Cost Reduction
Traditional systems impose hidden and fluctuating fees. Conversely, blockchain drastically reduces transaction costs by eliminating bank commissions and inflated exchange rate fees. For instance, a $1,000 transfer can complete without the recipient losing value along the way—nearly impossible with conventional methods.
“Many Mexican companies already use blockchain to optimize their international payments. For example, firms importing products from China and needing to convert Mexican pesos to yuan for payments to suppliers see instantaneous conversions with competitive exchange rates using blockchain,” detailed Federico Javin.
Another relevant case is Mexican companies operating in Europe using blockchain for large-volume transfers to countries like Spain and Portugal, achieving faster and more secure transactions. Similarly, the Mexico-U.S. corridor, one of the world’s largest, has seen significant efficiency and cost improvements with blockchain.
Key Questions and Answers
- What are cross-border transactions? Cross-border transactions refer to financial operations involving currencies from different countries.
- Why are cross-border transactions important? They play a crucial role in global commerce and international business growth.
- What challenges do traditional cross-border payment systems face? These systems involve multiple intermediaries, leading to slow processing times, hidden costs, and lack of transparency.
- How does blockchain address these challenges? Blockchain offers faster transactions, increased transparency through immutable records, and reduced costs by eliminating intermediary fees.
- What is Conduit’s role in this transformation? Conduit, with its advanced technology capabilities, helps businesses adopt blockchain for optimized cross-border payments.
