Has the time come for banks to embrace blockchain technology?
In the rapidly evolving world of finance, banks are turning to blockchain technology to revolutionise cross-border payment systems. This shift towards digital infrastructure promises faster, cheaper, and more transparent transfers.
Key strategies include the integration of stablecoins, the deployment of blockchain-based real-time payment rails, extending operational hours via blockchain infrastructure, and adopting compliant API solutions.
Many banks are already utilising stablecoins, with 58% prioritising them for cross-border payments. These digital assets enable instant or near-instant settlement, bypassing the delays of interbank intermediaries. Collaborations like the Circle Payments Network with global banks demonstrate how blockchain can support real-time settlement infrastructure tailored to cross-border corridors.
The use of blockchain-based rails, such as J.P. Morgan's Kinexys Digital Payments, allows banks to extend global trading hours and settle FX trades within seconds, even outside traditional market hours. This improvement greatly enhances client experience and reduces liquidity lockup.
Platforms like TransFi offer banks and enterprises compliant, plug-and-play API stacks to send, receive, and convert stablecoin payments globally, making it easier to integrate blockchain payments into existing infrastructure.
First Abu Dhabi Bank partnered with J.P. Morgan to pilot programmable payments using JPM Coin Blockchain Deposit Accounts in September. Similarly, DBS, a Singaporean bank, launched a tokenisation and smart contract-enabled platform in October. Both Citi and DBS's platforms replace traditional transactions with contracts backed by tokenised cash.
Institutional clients can initiate instant payments and liquidity movement between participating Citi branches without owning any tokens. Visa's Visa Tokenised Asset Platform (VTAP) allows participating financial institutions to mint, burn, and transfer fiat-backed tokens within a single API connection. Visa made the VTAP available in a test environment in early October.
More announcements involving blockchain-powered banking services are likely to come. In September, Japanese banks MUFG, SMBC, and Mizuho piloted the integration of blockchain infrastructure with the Swift network, focusing on improving cross-border remittance services.
The long-term success of blockchain in expanding the banking sector with new financial solutions remains uncertain. However, the decentralised structure of blockchain ensures 24/7 availability, lower fees, immutable transaction records, and opens access to underserved regions, further enhancing cross-border payments’ efficiency and inclusiveness.
As banks continue to adopt these strategies, the future of cross-border payments looks promising, with increased speed, transparency, and accessibility at the forefront.
Technology in finance is not limited to blockchain alone; banks are also incorporating API solutions to seamlessly integrate blockchain payments into their existing infrastructure, as demonstrated by platforms like TransFi.
The integration of stablecoins and blockchain-based real-time payment rails, such as J.P. Morgan's Kinexys Digital Payments, hold the potential to revolutionize finance by providing 24/7 availability, lower fees, and immutable transaction records, making cross-border payments more efficient and inclusive.
