How Blockchain Can Transform International Payments for Startups

08.11.2024

Blockchain technology is revolutionising the way businesses handle international payments. For startups operating in Switzerland and across Europe, blockchain provides a faster, more secure, and cost-effective alternative to traditional banking channels. This article explores how blockchain technology can address the key challenges of cross-border payments and unlock new opportunities for startups seeking efficient payment solutions.

What is Blockchain?

Blockchain is a decentralised ledger technology that records transactions across a network of computers. Each transaction is encrypted, validated by participants, and added to a block, ensuring transparency and security. Blockchain-based payment systems, such as Bitcoin, Ethereum, and Ripple (XRP), are being used to facilitate international transactions with minimal intermediaries.

Unlike traditional banking systems, blockchain operates 24/7, ensuring real-time settlement of payments across borders.

Key Benefits of Blockchain for International Payments

1. Lower Transaction Costs

Traditional international payments involve several intermediaries—such as correspondent banks—which drive up transaction fees. Blockchain eliminates these intermediaries, reducing costs significantly.

Swiss Example: A startup in Zurich using Ripple’s blockchain network can send payments abroad with lower fees compared to SWIFT transfers, optimising cash flow.

2. Faster Cross-Border Transactions

While traditional cross-border payments may take days to settle, blockchain ensures near-instantaneous payments. With blockchain, startups can access real-time funds and avoid delays caused by different time zones or banking holidays.

Fact: Payments made through RippleNet settle within seconds, compared to the 2-5 days required by SWIFT.

3. Enhanced Security and Transparency

Blockchain transactions are encrypted and immutable, making it difficult for fraudsters to alter or tamper with records. Each transaction is timestamped and visible to participants on the blockchain, providing complete transparency.

This level of security reduces the risk of fraud and increases trust in financial transactions for startups.

4. Multi-Currency Support and Stablecoins

Blockchain allows businesses to transact in multiple cryptocurrencies or stablecoins, such as USDC or Tether, which are pegged to the value of fiat currencies. This simplifies currency exchange and ensures transparency in international transactions.

Insight: Swiss startups working with global clients benefit from stablecoins to avoid the volatility of traditional cryptocurrencies and simplify exchange rate management.

5. Smart Contracts for Automated Payments

Blockchain platforms like Ethereum enable businesses to create smart contracts, which are self-executing contracts with predefined conditions. These contracts automatically release payments when conditions are met, streamlining operations for startups.

Example: A Swiss tech startup can automate supplier payments with smart contracts, ensuring timely settlements without manual intervention.

Challenges of Blockchain Adoption in International Payments

Despite the benefits, startups may encounter challenges in adopting blockchain-based payment systems:

• Regulatory Uncertainty: Blockchain regulations vary across countries, which could complicate cross-border operations.
• Volatility of Cryptocurrencies: While stablecoins mitigate volatility, businesses need strategies to manage currency fluctuations when using cryptocurrencies.
• Technology Integration: Implementing blockchain payment solutions may require technical expertise and adjustments to existing financial systems.

Blockchain and Compliance in Europe

The European Union and Switzerland are gradually introducing blockchain regulations to ensure transparency and security. The Markets in Crypto-Assets Regulation (MiCA) in the EU aims to create a harmonised framework for blockchain assets, encouraging innovation while maintaining oversight.

Swiss startups benefit from a blockchain-friendly environment, as Switzerland has developed crypto-regulations and hubs, such as the Crypto Valley in Zug.

The Future of Blockchain in International Payments

Blockchain technology is set to transform international payments further with the rise of central bank digital currencies (CBDCs) and cross-border blockchain networks. As more financial institutions adopt blockchain, startups will gain access to faster, more scalable, and regulated payment solutions.

Conclusion: A Strategic Move for Startups

Blockchain technology offers startups a powerful tool to streamline international payments, reduce costs, and enhance security. Early adoption of blockchain-based payment solutions allows startups to operate more efficiently in global markets and build trust with international clients.

By leveraging blockchain, Swiss startups can bypass traditional banking challenges, ensuring faster transactions, transparent processes, and lower costs. This strategic shift prepares businesses to thrive in an increasingly digital and borderless economy.