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Blockchain in cross-border payments: SMEs’ opportunity in international trade

By Marcus Treacher, SVP Customer Success at Ripple

Globalisation has transformed the world’s economy. While the first stage of economic change was driven primarily by large corporations who had the resources and supply chains to expand internationally, the next wave of economic growth will be shaped by the growing role of SMEs in global trade. Today SME cross-border payments represent a significant portion of the global B2B payments market, amounting to over $10-15 trillion annually. In fact, B2B payments are growing faster than C2C and B2C markets at 5-10% year.

Once the backbone of the domestic economy, SMEs now have more opportunities than ever to expand into new markets thanks to the recent innovations in payments and the rapid growth of international ecommerce. For instance, ecommerce platform operators such as Amazon and eBay have made it easier for SMEs to sell products abroad. Moreover, the rise of the digital economy has placed a stronger focus on agility and disrupted many industries — including retail, financial services, logistics and transportation, and manufacturing among others. This has provided a level playing field for start-ups and SMEs to compete with large enterprises.

Another big change has been the shift of global money flows. As emerging markets such as those in Southeast Asia and Latin America are increasingly important for global trade, cross-border payments are becoming a key driver of economic growth. In fact, the global payments market is expected to reach $2.9 trillion by 2022 according to data from McKinsey, and more than half of this growth ($1.6 trillion) is expected to come from Asia-Pacific. This a great opportunity for financial institutions operating in these markets and for the local economies, given that SMEs account for 60% of employment and 40% of national income in emerging markets.

Breaking the barriers for SMEs

But sending money around the world is still reliant on a fragmented payments infrastructure that hasn’t been refreshed since the 1970s and was designed to serve big corporates with bulk payments — not today’s digitally minded, fast-moving businesses. For SMEs, this often results in costly delays and high foreign transfer fees, which negatively impact cashflow and makes it harder for them to compete with large enterprises. In fact, recent research revealed that 69% of UK SMEs pay unnecessary cross-border payment fees that make international trade more costly.

With SMEs’ role in international trade expected to increase, access to affordable cross-border payment solutions will be key for ensuring they can compete successfully in the global marketplace.

Blockchain technology can resolve the inefficiencies for cross-border payments and provide a faster, cheaper and more secure alternative to the current system. Using blockchain, financial institutions can send and settle payments in seconds and for a fraction of the cost of traditional bank transfers, allowing SMEs to move money around the world as easy as they are sharing information over the Internet. We call this The Internet of Value.

For example,  Ripple partnered with Cambridge Global Payments — a subsidiary of Fleetcor Technologies and a leading global provider of commercial payment solutions — last year to help them achieve just that. By using XRP to facilitate cross-border payments, the company was able to cut down the costs for international B2B payments and bing down transaction speed to just a few seconds.

How the Internet of Value can help boost international trade

The Internet of Value can fundamentally create a new financial services ecosystem that is much more transparent and efficient, allowing SMEs to compete with larger players by bringing down the cost of managing imports and exports. While the traditional cross-border banking model was created for large-value, large-volume payments, this new approach is tailored to the needs of SMEs and provides a faster, more cost effective way to process small-value payments.

Just like routers on the Internet, blockchain can help route money across independent payment networks — including banks, digital wallets, clearing houses, stock exchanges, enterprises and more.

This approach to cross-border payments can also help SMEs improve liquidity by enabling them to move money easily and cost-effectively 24×7 depending on where funds are needed. Recent research revealed that 67% of SMEs believe that poor liquidity is one of the biggest obstacles to business growth because it locks valuable working capital that could otherwise be used for investing in tech innovation, hiring and expanding into new markets.

The Internet of Value can help unlock such capital held in foreign nostro and vostro bank accounts,  but doing this would require the addition of a digital asset.

How digital assets can improve liquidity for SMEs

An independent digital asset can improve liquidity by allowing different market players to exchange monetary value easily and without having to hold cash in accounts with foreign banks. In this scenario the digital asset acts as a bridge between the sender and recipient of the payment, enabling almost real-time currency exchange.

What makes digital assets unique is that they’re universal currencies, meaning anyone can use them as units of value anywhere in the world.

For instance, Euro Exim Bank is a UK SME bank which specialises in international export and import payments. The bank uses blockchain, combined with XRP, to provide clients with on-demand liquidity for international transactions. So instead of needing multiple pre-funded currency accounts around the world, the bank can move money where and when they are needed by its clients.

In addition to this, Euro Exim Bank has started embedding complex trades within blockchain messages, allowing it to automate international trades and even further reduce the speed and costs of payments for international exports and imports.


A recent report from Juniper Research revealed that B2B cross-border transactions will increase 7% by 2023 thanks to the rise of blockchain-based payment networks. Blockchain and digital currencies are a great alternative to traditional cross-border payments as they offer a significantly faster, cheaper and more transparent way to move money around the world.

Only by bringing down the cost of cross-border payments and resolving the inefficiencies of the existing payments system can we empower SMEs to take advantage of the growth opportunities that the global commerce market offers.