The Challenges of Cross-border Payment and the Role of Terrabit

Cross-border trade has seen tremendous growth in the past decades. It is increasingly common practice for businesses to source goods and services internationally. A major challenge most businesses face when sourcing for goods and services internationally is cross-border payment issue. The payment system hasn’t changed in decades. Today, most cross-border trade payments are done through correspondent banking relationships, whereby a series of banks and domestic payment systems are typically linked together to move funds. While the volume of trades continues to grow, pressure is being mounted on both banks and payment systems to improve the cross-border payment processes.

Over the past few years, many countries of the world have established both high and low-value payment systems that are based on proprietary communication and security standards. As a result of largely independent development, there is a lack of standardization and automation in inter-bank and intra-bank operations. This has adverse effects on banks and businesses alike, and results often in manual intervention to collect and repair data.

Major banks with subsidiaries, branches, and associated banks in many countries usually move funds to a destination country by an intra-bank transaction. The beneficiary is either credited directly if it has an account with the foreign operation or the payment is sent to the beneficiary’s bank via a bilateral transfer, or a national clearing and settlement system. A report, however, finds this method to be the most costly and inefficient method due to the use of non-standard customer interfaces, incompatible formats between domestic and foreign banks, and the low degree of automation in banks’ internal systems.

What Are The Challenges of Cross-border Payments

Cross-border payments are intrinsically inefficient because there is no one single ubiquitous global payment system. There are four challenges that must be overcome in order to improve the cross-border process:

• Most payment systems operate based on local laws and practices within existing domestic banking and financial structures.
• Lack of a common standards that are acceptable globally and variations between systems have reduced the ability of both bank and corporate treasury or enterprise systems to seamlessly pass data between each other.
• Government regulations are changing how payments are made. Payments are subject to domestic regulations that compound the challenges of cross-border payments further because often rules vary between an originating and receiving country.
• Cross-border payments are expensive. Costs associated with cross-border payments are related to various factors. Businesses tend to pay fees not only for international payments but also for other explicit or implicit fees such as foreign exchange conversion. Moreover, various intermediaries are involved in the payment process, particularly through the widespread use of correspondent relationships which creates an overpriced and frustrating bottleneck. Consequently, the execution time for cross-border payments is substantially longer than for domestic payments, which increases the floating cost (in the absence of value dating).

Blockchain to the Rescue

Blockchain can resolve the above inefficiencies and provide a faster, cheaper, and more secure alternative to the current system in use. It does that by streamlining the process and storing each and every transaction on a secure distributed ledger that cannot be altered. The moment a transaction is recorded, the recipient has access to the funds, eliminating middlemen, delays, and unnecessary fees. There is greater overall accountability and security since the payment cannot be altered or reversed once it has been entered into the ledger.

Blockchain-based cross-border payments offer significant advantages to both consumers and businesses in that they are:

• Cost-effective (with about 40% to 80% reduction in transaction costs)
• Immediate (an average of four to six seconds to finalize unlike the traditional methods that take days)
• Secure and transparent (being a decentralized ledger, blockchain holds a verifiable and immutable record of every transaction and distributes it for all authorized users to see)

As a matter of fact, blockchain is the future of cross-border payments. And any company who realizes this now and embraces it will have a distinct advantage over competitors who stick to the conventional methods.

The Role of Terrabit

Built by Terra Foundation, the creator of TerraCredit, Terrabit is an all-inclusive platform. A highly secure and super-fast payment platform, a centralized cryptocurrency exchange, and a crypto mining platform, Terrabit is more than a crypto exchange.

Terrabit serves as a centralized cryptocurrency exchange, TerraCredit mining platform (via Mininode), and a payment processing platform. My focus here, however, is on the payment processing aspect. Terrabit makes it very easy to send money, pay for goods and services or to receive payments for services from any part of the world. It enables both banked and unbanked users to have a digital wallet to store, and/or send both fiat and cryptocurrencies. You can send and receive payments without the need of a third party bank; and virtually no transaction fees (when transacting with their native coin – TerraCredit).

The only thing you need to send money across is the email address of the receiver. Even if the receiver is not a registered user of Terrabit, you can still send money to him/her. The receiver gets a notification in his mailbox, uses that same email address to create an account on Terrabit to claim his money.

So, when next you want to send money across without paying unnecessary transaction fees, head over to Terrabit and:

1. Create/login to your account
2. Fund your account with the amount you want to send. International funding of USD through credit or debit cards is available globally
3. Get the email address of the recipient
4. From your Terrabit account’s dashboard, click on the “Send” button
5. Click on the currency you want to send (at the time of writing this article, you can send the following currencies: Fiat currencies that can be sent are United States Dollars, Nigerian Naira, and South African Rands while cryptocurrencies that can be sent include Bitcoin, CREDIT, Ethereum, Litecoin, USDT (Tether), and USDT.ERC-20).
6. Select the option, “Internal Transfer” and fill the form that will come up with the following information
Enter the amount to send, enter the recipient email address, or username (if the receiver is already a registered user of Terrabit), enter your security pin and hit the “Send” button. The money will get to its destination within minutes.

Conclusively, to eliminate third parties in your cross-border transaction, and to enjoy a secured and transparent transactions with near-zero transaction fees, think Terrabit.