What’s the Use of Blockchains? How BitPay is Enabling International Business with the Emerging Nigerian Market
Cross-Border Payment Problems
The Internet made it possible to talk to almost anyone in the world within minutes, no matter how far away they are. Unfortunately, most individuals and businesses are still stuck making international or cross-border payments with technology from long before the Internet Age.
Using traditional banking to send cross-border payments remains slow and hard to track. As Erin McClune concluded in her article on this subject, “At the end of the day, money doesn’t cross borders. There is no international wire, just a series of domestic transactions.”¹ Worse still, increased regulation across the Western world (both in the U.S.² and the E.U.³) has led to banks cutting down the number of correspondent banks around the globe.⁴
Invented in 2008, blockchain payments like Bitcoin and Bitcoin Cash allow businesses to send and receive payments globally that arrive within minutes and confirm within an hour. The transactions are straightforward and transparent to all parties involved. BitPay helps businesses by processing the payments using the Bitcoin and Bitcoin Cash blockchains.
It might sound counterintuitive, but it is easier and faster to exchange your dollars for Bitcoin, send the Bitcoin to someone in Japan, and have the recipient exchange the Bitcoin for yen than it is to turn dollars into yen through traditional banking channels. But don’t take our word for it. In 2016, McKinsey & Company wrote:
…cross-border payments continue to be expensive, slow and lacking in transparency on both costs and delivery times. In 2015, a McKinsey survey on consumer cross-border payments found that consumers typically pay a fee of €20 to €60 on top of the prevailing foreign-exchange spread. And this fee does not even guarantee timely delivery: although most cross-border payments could in theory be executed in one to two days, the survey revealed that a typical retail cross- border payment took three to five working days to complete.⁵
Blockchain in Practice
This isn’t theory about how blockchain payments can be used someday. Right now, companies are using cross-border blockchain payments through BitPay to make international business easier, faster, and more efficient.
For example, a Fortune 500 company is having trouble moving funds from their Nigerian subsidiary to their bank in Switzerland which requires payment in euros. Nigeria’s liquidity problems and poor banking infrastructure made this transaction difficult.
The blockchain unit within this multinational corporation proposed Bitcoin as a solution to this problem. They came to BitPay and asked for our help. We partnered with a premiere cryptocurrency exchange for much of the African continent and made it happen.
For this payment, the Nigerian subsidiary exchanged their naira for Bitcoin through the African cryptocurrency exchange. The exchange then sent the Bitcoin to BitPay and BitPay processed the Bitcoin into euros to send to the company’s Swiss bank account.
This program started as a test of six cross-border blockchain payments once a month for six months. The result? This company is excited with the solution we provided and hopes to expand this program. Praise from a company this large is quite a stamp of approval. Like the internet did for communication and information, blockchain payments are making international business easier, cheaper, and faster.
Want to learn more? Check out BitPay’s cross-border payments solution and get in touch with our team if you’d like to start using blockchain payments for your international business.
- Erin McClune, There is No Such Thing as an International Wire (Payment Views 2014), https://pv.glenbrook.com/there-is-no-such-thing-as-an-international-wire/
- Thierry Sanvee, Victor Barre, Jonathan Ngo, and Christopher Baranyay, Reinventing The Cross-border Payment Operating Model: How To Combine Regulatory Burden And Business In The Cross-border Payment Industry (Wavestone, 2017), 2: “As part of a global effort to combat terrorist financing, more and more regulations have been put in place over recent years…”
- Ebru Pakcan, Managing Cross-Border Payment Costs, Risks and Efficiency (Treasury Management International, 2012), 18. The section concerns the European Union’s implementation of SEPA (Single Euro Payments Area) and its effect on cross-border payments.
- Sanvee, Barre, Ngo, and Baranyay, Reinventing The Cross-border Payment Operating Model, 2: “Banks are trimming down the number of correspondent banks they have around the globe chiefly because costs have increased to the point where maintaining a correspondent bank in some risky areas with low volumes has proved to be unprofitable.”
- Olivier Denecker, Florent Istace, Pavan K. Masanam, and Marc Niederkorn, “Rethinking correspondent banking,” McKinsey on Payments 9, no. 23 (June 2016), 4.