Global Connectivity: Real-Time Finance's Impact on Cross-Border Transactions

Cross-border transactions have long functioned as the driving force for international investment and play a pivotal role in the global economy. As companies continue to expand their operations and engage in international partnerships, the inefficiencies of legacy payments technology continue to pose significant challenges. According to a 2022 study, over 30% of businesses cite cross-border transactions as a consistent pain point in their financial operations.

The rapid development of real-time finance tools in recent years has unlocked immediate value while catalyzing business growth with newfound capabilities to serve clients more effectively. 

What is Real-Time Finance?

Unlike traditional methods such as ACH transfers and paper checks, which are limited by high transfer fees, transaction size limits, 9-to-5 hours of operation and lengthy time delays, real-time finance technology enables funds to be transferred instantaneously, 24/7/365, and with greater confidence in the security of each transaction.

A key technology in enabling real-time transactions is private permissioned blockchain, which is a tightly controlled database which is accountable to specifically approved participants and operates in a network of trusted counterparties.

A primary benefit of this technology is the ability to send and receive payments instantaneously and continuously, allowing users to pay bills, reimburse vendors, deposit earnings, and make time-sensitive purchases more efficiently all within a controlled database. Real-time finance solutions also provide immediate access to transaction data, promoting accountability and transparency in transactions.

In recent years, businesses have effectively been able to implement these solutions at scale. Mega-retailer Walmart uses real-time finance data to improve its operations, processing sales from millions of customers per hour. The technology has also proven beneficial in point-of-sale systems, where e-commerce platforms like Shopify leverage instant access to its records to update stock in real time, or upsell products to customers who are already purchasing.

Impact on Cross-Border Transactions

Real-time finance has served as a major growth driver for international adoption, enabling seamless cross-border transactions while promoting broader financial participation and economic integration.

The most significant benefit of real-time finance on cross-border transactions is speed, which revolutionizes the efficiency of international payments, mitigating the risk of fraud and minimizing the time funds are vulnerable to potential malicious actors. The traditional concerns of international payments (i.e. high exchange rates and additional fees) are also eliminated as intermediary banks and processing costs are no longer a consideration. Real-time finance also provides the capability to trace and monitor transactions as they occur, ensuring regulatory compliance.

For instance, SWIFT’s Global Payment Innovation (GPI) initiative enhances cross-border payment transparency and compliance, ensuring transactions meet regulatory requirements such as anti-money laundering (AML) laws. Similar use cases not only streamline cross-border transactions, but also promote safety, security, and efficiency on a global scale, paving the way for a more accessible financial ecosystem.

Growing Adoption

The growing adoption of real-time finance in cross-border transactions is transforming the payments process across multiple industries, fostering a more efficient and secure environment for businesses. Total volume is estimated to exceed $56.1 trillion in global B2B transactions by 2030.

The technology is also delivering immediate benefits to several industries. Take department store conglomerate Macy’s, for example, which utilizes real-time finance data to efficiently assess operational costs on inventory and customer orders, allowing its finance teams to seamlessly operate during peak holiday seasons. 

Brands in the shipping industry experience similar outcomes. Cargo companies cannot pick up freight until fees have been paid, most of which initiate outside of the United States and across multiple time zones. To release goods, freight forwarding companies must first pay for the cargo to be released. Without payment, shipments are often delayed, and storage fees can accumulate rapidly, cutting into profitability for all those involved. With real-time finance tools, companies in the freight forwarding process are empowered to transact instantaneously with partners around the globe, and operate with greater speed, efficiency, and security.

As more organizations adopt the technology to improve their cross-border transaction capabilities, businesses worldwide will experience an exponential increase in productivity and servicing capabilities for their customers.