Major financial institutions are increasingly testing digital assets, including XRP, to improve cross-border payments

Major financial institutions are increasingly testing digital assets to improve cross-border payments, as highlighted by a recent report from Mastercard. The report, titled "Blockchain Technology Fuels New Remittances Business Cases," explores several examples of blockchain applications in remittance systems.

Mastercard's report sheds light on the growing interest of mainstream payment firms in blockchain infrastructure. It also provides further credibility to the role of Ripple and XRP in the remittances domain.

The report showcases several examples of how blockchain solutions are being explored across different regions and technologies. Among the examples given by Mastercard is the Japanese money transfer service SBI Remit, which uses XRP as a bridge currency for fiat conversions.

"SBI Remit has integrated Ripple's XRP into its cross-border payment service in partnership with several banks in Japan and Southeast Asia. The service, launched in 2022, enables instant and low-cost money transfers between Japan and Vietnam, the Philippines, and Cambodia using XRP as a bridge currency for fiat conversions. This initiative highlights how digital assets are being leveraged to optimize existing payment systems."

The report continues: "In 2018, Stellar announced a partnership with MoneyGram to facilitate faster and lower-cost cross-border transactions. The integration aims to enhance liquidity in regions underserved by traditional banking systems. Stellar's integration with MoneyGram showcases the potential of blockchain technology to revolutionize the global remittance landscape."

Highlighting the broader trends in the space, the report notes: "Several examples of cryptocurrencies being used for remittances attest to the technology's ability to cut costs and speed up transactions. In addition to MoneyGram's partnership with Stellar, examples include SBI Remit's use of XRP and earlier partnerships such as Circle's integration with Flash Pay in 2015 to launch a cross-border mobile payments service using Bitcoin."

The report from Mastercard provides a snapshot of the evolving landscape of remittances and the role of blockchain technology in driving innovation within the industry. As institutions continue to explore and experiment with emerging technologies, the potential for disrupting traditional financial services and creating more efficient and inclusive global payment systems is becoming increasingly apparent.

In other developments, the Federal Reserve and international organizations like the Bank for International Settlements (BIS) are exploring ways to enhance cross-border payments, especially considering the high costs and inefficiencies of existing cross-border payment systems.

According to a recent report by Point A Impact, the average cross-border payment fee is around $43, while the processing time is typically three to five days. In comparison, cross-border payments via Bitcoin reportedly have zero fees and a processing time of about 10 minutes.

Moreover, Point A Impact highlights that cross-border payments are often not completed on weekends or holidays, further impacting the efficiency of global transactions.

Highlighting the efforts of the Federal Reserve, the report mentions the creation of the Fed Now service to facilitate same-day payment processing within the US.

"The Federal Reserve, in particular, is working diligently to modernize and streamline the US payment system. Last year, the Fed completed testing of its instant payment service, Fed Now, which is set to launch in July 2023. Fed Now will enable same-day payment processing, in contrast to the current system, which can take three to five days for cross-border transactions."

Furthermore, the report sheds light on the initiative of the Bank for International Settlements (BIS) to bring together central banks and commercial institutions to develop innovative cross-border payment solutions.

"The Bank for International Settlements (BIS) is also engaging in initiatives to improve cross-border payments. Having started a task force in 2020 to focus on cross-border payments, the BIS is bringing together central banks and commercial institutions to develop and test new solutions."

Highlighting the participation of Ripple in this endeavor, the report notes, "Institutions such as Circle, PayU, and Ripple are taking part in this task force to identify opportunities for collaboration and integration."

This signals that the involvement of major financial institutions and international organizations is crucial in advancing the adoption of digital assets for cross-border payments.

As institutions like the Federal Reserve and the BIS play a role in streamlining and optimizing global payment systems, the role of digital assets and emerging technologies is becoming increasingly apparent in facilitating a more efficient and interconnected financial landscape.