One of the use cases for cryptocurrency and\or stablecoins is that it offers cheaper and faster alternatives to the conventional payment rails. Whether they will succeed remains to be seen but I have long believed cross country payments is one of the areas where the banking system really does need to lift its game.
Against that context, this research study released by the Bank for International Settlements (BIS) suggests that TradFi banking is making some improvements.
The study lists three key takeaways …
“- The speed of cross-border payments on SWIFT global payment innovation (gpi) is generally high with a median processing time of less than two hours. However, payment speeds vary markedly across end-to-end payment routes from a median of less than five minutes on the fastest routes to more than two days on several of the slowest routes.
– Prolonged processing times are largely driven by time spent at the beneficiary bank from when it receives the payment instruction until it credits the end customer’s account. Longer processing times tend to occur in low and lower-middle income countries, which can be partly attributed to capital controls and related compliance processes, weak competition as measured by the number of banks as well as limited operating hours of and the use of batch processing by beneficiary banks.
– Cross-border payments on SWIFT involve, on average, just over one intermediary between the originator and beneficiary banks. Each additional intermediary prolongs payment time to a limited extent, while the size of time zone differences between banks has no discernible effect on speed.”
If I am reading it correctly, the study does not capture any delays the initiating bank may introduce before it processes a payment instruction. With that caveat, it is worth noting that TradFi is not standing still – competition can be a beautiful thing.
Tony – From the Outside