B2B cross-border transactions will be on blockchain

The world we operate in is rapidly changing, and businesses are having to adapt swiftly. Following the global pandemic, many enterprise businesses were forced to look domestically as supply chains were hit and international trade became more challenging. This has been compounded by geo-political tensions, which have been impacting global supply chains. However, many supply chains have started to open up and are becoming increasingly strong as new technology unlocks borders, both physically and metaphorically. 

Despite this, one consistent ‘thorn in the side’ issue for finance teams is that of cross-border payments. Moving any amount of money safely and quickly to different parts of the world without being hit with excessive fees is a challenge that’s been well-documented from a consumer perspective. The issues are compounded when the size and complexity of the transaction multiplies for enterprises. 

However, there is a solution here. Digital currencies powered by blockchain technology are poised to revolutionize B2B interactions on a global scale and have the ability to remove those cross-border payment problems for businesses. They will offer the ability to pay 24/7, 365 days, all around the world in a secure manner with low fees.

At the start of October, the online payment giant PayPal used SAP’s new Digital Currency Hub to pay an invoice to Ernst & Young using its stablecoin PayPal USD (PYUSD). Examples like this show the increasing adoption of digital currencies and blockchain technology by global firms, with cross-border payments being a tangible use case.

The challenges for enterprise businesses

Legacy infrastructure supporting cross-border transactions can be cumbersome, expensive and full of compliance challenges. Enterprises of all sizes feel this pressure acutely, and digital currencies can solve many of the problems that these enterprises face. When I speak to our clients, it’s clear how digital currency payments can help them. The big three challenges most frequently referenced are: 

Speed and accessibility: Traditional payments can take place only during banking hours, and customers need to be mindful of closing times. Also, they take up to several days to settle—especially when complex in nature or of a high value. In contrast, transactions made with digital currencies can be executed almost instantaneously. This speed is particularly important for large enterprises needing to move high amounts of money cross-border on a weekend, for example, to complete an M&A transaction.

Cost efficiency: Enterprises often face high transaction fees and unfavorable exchange rates when engaging in international trade. These costs can accumulate quickly, impacting profitability. Digital currencies can significantly reduce transaction fees, as they eliminate the need for multiple intermediaries.

Regulatory compliance: Globally, we’re seeing increasingly complex regulatory environments. Navigating multiple different geographies compounds this issue. Digital currencies can enhance transparency and traceability, making it easier for enterprises to comply with local and international regulations. Blockchain’s immutable ledger provides a reliable audit trail, facilitating compliance and reducing the risk of fraud.

Efficiencies and savings for enterprise businesses 

If the three challenges listed above are solved through blockchain technology and digital currencies, enterprise businesses can streamline operations significantly—with clear cost savings. But the benefits go so much broader too: 

Improved cash flow management: Faster transactions lead to better cash flow management. Enterprises can receive payments in real time, enhancing liquidity and allowing for more strategic investments and operational flexibility.

Ability to establish new business models: With significantly lower costs, especially for smaller payments, enterprises can establish new consumption or subscription-based business models involving more frequent invoicing with lower payment amounts, thus allowing them to differentiate their offerings.

Reduced fraud risk: Fraud and cybercrime are significant risks in cross-border transactions. Blockchain’s decentralized nature ensures that no single entity has control over the entire system. Each transaction is recorded on a public ledger and cannot be reverted, so fraudulent chargebacks are impossible.

Looking to the future—how do we get there?

The points I’ve listed above provide only a snapshot of why I believe we’ll start seeing more and more enterprise B2B payments take place on the blockchain with stablecoins. The savings, operational efficiency, and security benefits combined are too much to ignore. However, there’s still a long way to go before blockchain-enabled enterprise stablecoin payments become the norm. 

To realize the full potential of blockchain in B2B cross-border transactions, enterprises must take deliberate steps to integrate this technology into their operations. The first step towards this future is for leaders to educate their teams about the benefits and functionalities of blockchain technology and digital currencies, particularly stablecoins. This understanding will facilitate smoother transitions and greater buy-in internally. 

Before full-scale implementation, enterprises should conduct pilot projects to test payments with stablecoins in controlled environments. This approach allows organizations to identify challenges and gauge the technology’s effectiveness for their particular use cases. Partnering with crypto custody providers and exchanges, as well as business application providers, can help businesses navigate any integration issues and provide valuable expertise and resources. 

I believe the future of B2B cross-border enterprise transactions is undeniably intertwined with blockchain technology. As we move forward, the call to action is clear: enterprises should consider evolving their financial strategies and utilizing the power of the blockchain and stablecoins for payments. The benefits are significant.