Faster Payments are Gaining Traction Around the World
SWIFT — a member bank-owned electronic platform used to transmit financial messages between its 11,000+ member organizations — powers most international money and security transfers.
But SWIFT, which stands for The Society for Worldwide Interbank Financial Telecommunications, is nearly as cumbersome as its name, at least according to those who count on it. Payments processed using SWIFT can take up to five days to settle and inputting incorrect transfer data can slow the process even further.
On top of that, SWIFT is costly. Fees can run as much as 5 percent for cross-border transfers, which can be a burden to small business owners and consumers needing to move money. Complaints about limited transparency are also common because businesses and individuals have little visibility into the status of SWIFT transactions. Yet, small and mid-size businesses (SMEs) — which account for 90 percent of businesses worldwide — rely on SWIFT to facilitate many global trade and transactions.
The Future of Global Payments & Cross-Border Transactions
Inefficiencies such as these fuel the demand for faster payments — either through fintech innovation or blockchain- and crypto-based solutions. Blockchain applications such as Ripple, XDC Network and Stellar have already proven themselves capable of facilitating cross-border payments. So have fintech companies like Block, which is owned by Square.
The need for faster, cheaper and more transparent cross-border transactions to better serve SMEs and consumers is helping drive the adoption of faster payment networks in forward-looking financial institutions.
Research shows that as many as 60 percent of SMEs have already turned to fintechs and blockchain providers for alternative payments and banking services. This adoption rate is especially pronounced for entrepreneurs operating in the Asia-Pacific and Latin America regions where regulatory frameworks already support digital transactions.
Digital Payments in the U.S.?
The cross-border payments market is on track to grow by 7 percent through 2025 and for many, blockchain solutions have become the preferred systems specifically because they offer lower fees and faster settlements. Asia-Pacific is at the forefront of digital payment innovation. In India, the Unified Payments Interface (UPI) processed more than 10 billion transactions in just one month. Japan is using a cashless payment system that promises to increase digital payments to 40 percent by 2027.
Many countries in Africa are already spearheading widespread mobile money adoption. Nearly 70 percent of global mobile money transactions happen in Africa. Mobile-first payment solutions like M-Pesa and Zeepay dominate markets such as Kenya and Nigeria, simply because the infrastructure there is less reliable.
According to McKinsey’s 2023 Global Payments Report;
Meanwhile, remittances via blockchain are also gaining ground in Africa as well as Latin America. Brazil and Argentina are seeing the adoption of stablecoins for everyday transactions, with projections showing that cashless transactions could grow by as much as 50 percent by this year. Brazil’s instant payments system, PIX, now handles more than 40 percent of retail transactions there.
The demand for instant payments has also picked up steam in Europe with initiatives such as the Single Euro Payments Area (SEPA). SEPA Instant and the UK’s Faster Payments Service have enabled real-time transactions across the continent. McKinsey predicts that SEPA adoption “could double by 2027.”
Meanwhile, demand for instant payments in the U.S. is gaining ground. According to the Federal Reserve, 86 percent of businesses and 74 percent of U.S. consumers say they used faster or instant payments in 2023. Nearly three-fourths of U.S. businesses and almost 80 percent of consumers here say they expect their financial institutions to offer instant payments.
Among the instant payment systems currently in use in the United States are The Clearing House’s RPT Network (which was unveiled in 2027), the FedNow Service (which the Federal Reserve introduced in 2023) and Zelle (a bank-owned, peer-to-peer app that enables transfers between bank accounts in minutes).
None of these are blockchain-based, but it may not be long until an instant cryptocurrency payment platform gains mainstream acceptance in the U.S., thanks in part to the fact that crypto-enthusiast David Sacks was hand-picked by Donald Trump to serve as “crypto czar” in his administration. The Trump administration is already calling for less regulation and more innovation. Sacks has a long history of supporting successful crypto projects, so it’s possible that he could make a U.S. digital dollar a reality.
Next Steps
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