Author: Anna Perozzi

The international business payments industry is growing and overcoming several challenges, also thanks to blockchain

International business payments are estimated to have reached 39.3 trillion in 2023, and the trend is expected to stay positive in the coming years.

While globalisation initially fuelled the phenomenon, it is only in recent years that the real leap forward has been made. Since the pandemic, in fact, more and more companies are using online marketplaces to purchase goods and services, giving a strong boost to B2B e-commerce.

There are many cases where companies have to make cross-border payments, here are some of the most common:

• B2B E-commerce
• Import-export
• Software subscriptions (SaaS)
• Salaries of international staff
• Trading and corporate investments
• Repatriation of funds and cash flows (multinationals)

The timing and costs of traditional payment methods, however, limit business growth and have real impacts on cash flows.

Thus, in recent years, new players have emerged in the fintech sector, which have developed solutions both with existing models and by exploiting new technologies such as blockchain. 

Let us elaborate below on the problems of international business payments and the solutions being developed.

The problems of international payments today

Despite the digitalisation drive and the emergence of numerous innovative and efficient payment solutions, the development of this sector is not homogenous and synchronised worldwide. Therefore, obstacles and challenges still exist in the field of foreign payments, as several studies show. 

Costs and settlement

Credit card circuits charge fees between 2 and 4% for international payments.

Bank transfers such as Swift and SEPA, on the other hand, rely on complex global networks, which may include numerous intermediaries and consequently higher costs and extended timeframes, as well as opaque or unpredictable information about these. 

In general, cross-border business payments can cost up to 10 times more than a domestic payment.

In terms of costs, the need to exchange currency also plays a significant role. Each intermediary may charge various conversion fees, offer different exchange rates, or not provide sufficient visibility of the rate charged. Let’s say a US company accepts payments in Japanese yen: if these weaken against the dollar, the company will get less revenue than expected.

There is also an outdated habit of some banks that affects costs: that of keeping a separate account with foreign currency funds at another bank. This type of account, called ‘nostro/vostro account’, is used to facilitate high volumes of foreign exchange, but has exorbitant costs that can be passed on to customers.

Regarding settlement times, a cross-border payment can take up to one working week.

This is due to a number of factors. First of all, most banks in the world are still restricted by weekday inactivity and daily closing times.

Not only that: many institutions still refuse to update their software or even automate processes. This means that many operations are still manual and therefore slower.

Payment latency naturally impacts the liquidity and cash flow of the companies involved, but above all exposes them to currency exchange rate fluctuations.

Transparency and security

While in Europe we are used to the extreme simplicity provided by the single currency and a good-enough adoption of efficient and up-to-date payment systems, this is not always the case. The financial system is very fragmented at both the technical-structural and regulatory level. 

Financial regulation is constantly changing within different countries and economic areas. Therefore, it can be complex to maintain adherence and compliance with the laws of each country with which one conducts business.

In this context of diversity, which implies different security and quality standards, cases of poor user experience and lack of traceability of transactions are frequent.

A simple and transparent experience, on the other hand, is also crucial to ensure security, an aspect that should always be taken into account when handling payments. International ones are all the more vulnerable to cyber attacks and fraud attempts that exploit the lack of information and differences between financial systems. Therefore, companies carrying out global transactions must equip themselves with a solid security system and be aware of the dangers of the specific market they are entering.

Speaking of differences, the cultural aspect should also not be underestimated: the language barrier can intervene to complicate the experience and the resolution of problems such as disputes or refunds.

All these issues are felt most by small businesses, which have less access to resources to employ in this area. It is therefore not so much a matter of inventing new solutions from scratch, but of making them available: it’s about accessibility.

New technologies and their advantages

The adoption of new payment solutions does not only mean solving the above-mentioned problems, but also opening up new opportunities. To summarise, here are the 3 key benefits of innovating in this area:

1. Efficient international payments make it easy to open up to new markets and adapt to them in order to attract customers.
2. The automation implemented by fintech solutions speeds up the processing of transfers, avoids human errors and systematises fraud prevention. It also saves money, especially in the long term.
3. Greater transparency on costs, settlement times and exchange rates allows companies to forecast their expenses more accurately and optimise them.

So what are these solutions and how are they shaping up? 

In the banking and traditional payments sector, there’s talk about features and services such as:

• Optimisation of currency exchange rates, e.g. through APIs providing real-time data on foreign currency prices and the actual application of the desired rate.
• Virtual accounts, to manage their customers’ virtual balances more efficiently.
• Local acquiring or intelligent routing, to rely on a network of local banks in order to better manage payments to a given country.
• Multi-currency accounts, so as to avoid opening several accounts to manage different currencies.

Needless to say, these are just pieces of possible solutions, there is no definitive one.

In general, the most established payment circuits are beginning to build services focused on international trade. Among them, Swift launched Swift Global Payment Innovation in 2017, then Swift Go and Payment Pre-validation, which promise breakthroughs in settlement times and transparency. The circuit is also studying the possible benefits of CBDCs in this regard.

By the way, it is interesting to note how traditional institutions are increasingly moving towards blockchain. 

The blockchain and stablecoins

The benefits of blockchain have been identified mainly by digital payment providers, digital banks and card issuers.

Visa, in fact, launched B2B Connect in 2019, a solution that leverages the blockchain to facilitate transactions between banks, without requiring a card. Mastercard Send has also joined the trend, providing instant global payments through a private blockchain.

But why do the market leaders in digital payments choose blockchain, and how do they use it?

First of all, transactions on blockchain take only a few minutes, require very low fees and are easily traceable. Moreover, they can be executed in stablecoins, blockchain-compatible representations of fiat currencies. These, unlike cryptocurrencies, are not particularly volatile, as they replicate the trend of the dollar.

Thus, one can simply send stablecoins and convert them into fiat instantly so as not to incur price fluctuations during payment.

Stripe, one of the world’s largest fintechs, has also realised this, offering merchants the ability to transact with the USD Coin stablecoin. Visa, on the other hand, is exploring the use of USDC and the Ethereum network; while American Express has been working with Ripple since 2017 to process international business payments.  

It is not necessary, however, to enter into partnerships or subscribe to an expensive payment service.

You can start taking advantage of the benefits of blockchain for your company’s international payments in an even simpler way. By creating a Business Account on Young Platform you can easily buy, send and receive cryptocurrencies, plus access various services designed specifically for businesses.

On the account you will have all operations under control and a support service always available. 

Contact the team for more information at [email protected]

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Does your company have a crypto portfolio? Sub Accounts are the best way to manage different strategies or delegate activities

Learn what Young Platform’s Sub Accounts are and how to use them to better manage your corporate cryptocurrency portfolio. 

What are Sub Accounts?

Typically in a trading platform, a ‘Sub Account’ (SA) is a type of account subordinate to a main one, called a ‘Master Account‘ (MA).The MA may thus create secondary and segregated accounts, each of which may have different purposes. 

This facility is used for different purposes, but is usually set up to manage funds or assets separately. Here are just some of the common situations in which the Sub Account functionality could be useful: 

1. Management: possibility of using Sub Accounts to separate funds for different trading strategies or markets. For example, a trader might have one SA for day trading and another for long-term investments.
2. Monitoring: Sub Accounts allow transactions executed in different strategies or portfolios to be monitored separately. This can simplify record keeping and performance evaluation.
3. Risk: SAs can be used to set commensurate risk limits for different trading activities. This helps to avoid excessive losses on a specific account.

In essence, Sub Accounts offer greater flexibility and control in the management of funds. Let us now turn to the advantages of choosing the Young Platform service.

Young Platform Pro Sub Accounts

The functionality is available on demand and only from the Pro version of Young Platform, where it is very simple and intuitive to use. But first let’s see what it consists of.

The Master Account has full powers to:

• Send and withdraw funds to and from any SA
• Move funds between accounts (free of charge, no fees)
• View and manage SA orders
• Check SA balances
• View transactions executed by SAs
• Enable or disable certain cryptocurrency pairs for individual SAs
• Remove SAs
• Reset SA passwords
• View the access history of SAs

In addition, Sub Accounts can be ‘Managed’ or ‘External’, where the former is the mode dedicated to the company’s legal representative who wants to use both an MA and an SA, while the latter is the mode more suitable for teams. In the ‘External’ mode, the MA is managed by the legal representative, while the SA can be given to team members or collaborators.

The advantage of Young Platform is that you can combine this functionality with other services such as the Only Euro Bot: in this way, you simplify the receipt of cryptocurrencies in your account, without preventing you from making recurring trades or purchases.

In fact, as the Only Euro Bot simplifies the handling of payments in crypto by automatically converting them into euros, this can get in the way of trading. With Sub Accounts this is immediately solved: you activate the Bot on one account and with the other you focus on your market strategy.

Want to know more? Write to [email protected], our operators will contact you within 48h.

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The applications of blockchain in business range from traceability to cyber security. Find out how to integrate it into your business

Companies today are increasingly data-driven, data that they collect, process and use to improve their products or operations. This is combined with the continuing trend of technology towards automation. The exemplary fruit of these two currents is artificial intelligence: think of how much data ChatGPT’s software alone requires.

AI, however, is not the answer to everything. So here’s why blockchain can facilitate both the management of data and its automation.

The problem of trust in data

Today we have a large surplus of data: data that is more or less useful, more or less truthful, more or less sensitive or accessible. Managing this information correctly from the source is crucial to protect both people and organisations.

The consequences can vary in scope: from fake news that makes us look bad, to a serious breach of privacy that leads to financial losses.

After all, the data we believe in and how we read it create our reality. When data is falsified for whatever reason, communication problems can arise. What happens if a service communicates wrong information to its customer, or if the error occurs between two partner companies? Trust is broken, the customer or partner is lost. 

Not only that, the consequences can be even more serious: imagine what a mistake in a medical record or in the address of a parcel means.

But there are even more common examples that demonstrate the importance of trust in data. Would you buy a designer dress, knowing that it was produced through exploitation? Or organic food, knowing that it was not grown according to these parameters?

Unfortunately, there are many cases where producers ‘get away with it’, due to a lack of visibility of a product’s history, fragmented in so many places and intermediaries.

We have now surrendered to the normalcy that in all relationships, what cannot be controlled, must be left to blind trust. But it does not have to be that way.

Technology can help us in this too, and blockchain is especially perfect for replacing that margin of  blind trust with justified trust. Let’s look at the various application cases.

Traceability and verifiability

Imagine the blockchain as a register of immutable data. No data can be changed: there is only one version of the facts, the original one.

In addition, it is not controlled by a single authority, but can be compiled and managed with the consent of all those involved in the system. This makes information impartial and shared.

This is music to the ears of those sectors that fight counterfeiting every day. Especially when it comes to luxury goods, the value often lies in the origin. If the origin is certified, the customer will have complete confidence in the value of the good and will be incentivised to buy it.

Not only that: counterfeiting represents the biggest challenge globally for legal documents, financial documents and goods such as pharmaceuticals or foodstuffs. It costs companies more than 7 per cent of their annual expenditure, amounting to almost $4 trillion each year on a global scale.

For fashion brands, counterfeiting represents illicit competition resulting in a loss of sales of more than $50 billion every year. So Louis Vuitton, Prada and Cartier collaborated to create Aura, a blockchain system that allows the history of luxury products to be tracked and reliably authenticated. Microsoft and ConsenSys, a company specialising in blockchain technology, were involved in developing the technological infrastructure.

The traceability and immutability of data is also crucial in the supply chain.

When integrated, blockchain can offer real-time visibility into the entire production and distribution process. This means that companies can monitor every step a product undergoes, improving overall efficiency and creating added value. 

This is the case for Nestlé, which adopted blockchain technology to ensure the security of its supply chain, particularly focusing on ingredients used in the production of baby food such as puree and pouches produced by Gerber. This decision was influenced by events such as the salmonella contamination scare involving large quantities of baby milk powder in France in early 2018, as well as the E. coli outbreak affecting lettuce in the United States. In this context, ensuring food traceability has become paramount.

Security and privacy

The blockchain uses advanced cryptographic techniques to protect transactions and data. Moreover, since they are distributed networks, they do not have a vulnerable central point. This makes them resistant to intrusion: it is very difficult for anyone to try to hack or breach a blockchain network, as it would require a huge amount of resources and would be extremely complex. This feature greatly improves data security and minimises the risk of unauthorised access or data breaches. 

Suffice it to say that in 2021, analysis conducted by Statista revealed an expenditure of over USD 57 billion on cybersecurity. The following year this figure increased by 23 per cent over the previous year, reaching an impact of more than USD 71 billion on companies. Forecasts suggest that although 2022 represents the most expensive period in the last decade in terms of cybersecurity, 2023 will go well beyond that.

Engineers at the Defense Advanced Research Projects Agency (DARPA), the technology development wing of the US military, have developed a blockchain-based encrypted messaging system that allows US military personnel to exchange vital information in real time, anywhere in the world, without fear of interception by foreign hackers.

Staying in the context of data security, thanks to blockchain and the use of cryptography, the level of data privacy is highly programmable. One can choose a blockchain that only authorised persons have access to, with the aim of protecting sensitive data, or one can verify personal data without learning about it.

In any case, the recorded data is always immutable and shared by all participants.

It is no coincidence that applications in the field of digital identity and healthcare are among the most interesting.

One such company is Health Linkages, which leverages blockchain technology to promote transparent management of sensitive data, increase auditability of analyses and improve compliance in the healthcare sector. Thanks to Health Linkages’ blockchain, only authorised operators can share patient data. In addition, it records every single health event chronologically, providing physicians with a clearer picture for making medical decisions.

Discover opportunities for your business

According to research conducted by Fortune Business Insights, the size of the global blockchain technology market was estimated at $11.14 billion in 2022 and is expected to grow from $17.57 billion in 2023 to $469.49 billion by 2030, showing a compound annual growth rate (CAGR) of 59.9 per cent during the forecast period.   

With the expanding growth opportunities in the market and the wide range of possible applications and use cases, more and more companies are making significant investments in this innovative technology. If you would like to find out how your company can integrate blockchain into its business model, please email [email protected] to access our white-glove services.

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