Why Cross-Border Payments Innovation Starts and Ends With Ledger Technologies

In the history of finance, few tools are as fundamental as the all-mighty ledger.

This holds particularly true as it relates to the timeline and trajectory of cross-border payments innovations.

From the Age of Discovery and the emergence of bills of exchange, to the cross-border banking networks families like the Medici and the Fugger first established across Europe, the ledger has for centuries been central to the development of cross-border payments, evolving alongside technological advancements, economic shifts and the rise of global trade from simple handwritten records to sophisticated, distributed digital systems.

The earliest ledgers served two core purposes: they provided an indisputable record of transactions and ensured that merchants could reference their accounts if discrepancies arose. As trade routes expanded, the ledger became a universal language for cross-border commerce, allowing merchants from different nations to operate on the same foundational principles of accountability.

It was the digital revolution in the late 20th century that paved the way for significant advancements in ledger systems. As banking moved online, ledgers became entirely electronic, allowing for instant recording and reconciliation of cross-border transactions.

That’s where we stand today. And with the news Monday (Oct. 28) that Thunes has debuted a solution designed to help customers offer faster cross-border payments; truly unlocking fast, secure and seamless cross-border money movement is top of mind for businesses with an eye toward future global growth.

See also: Cross-Border Payments Cost Could Be Cut by Blockchain, If It Can Only Solve the Scale Problem

The Digital Ledger Era: FinTech and Real-Time Settlements

At the start of the 21st century, FinTech companies like PayPal, Wise and Revolut disrupted the traditional banking model by creating digital payment systems that bypassed traditional financial institutions. These companies leveraged digital ledgers to offer cost-effective, real-time cross-border payments, especially for smaller transactions like remittances, and by tapping into national payment networks and coordinating across various ledger systems, FinTech firms helped make cross-border payments more accessible and affordable.

But despite the ongoing advances in ledger technology, cross-border transactions, particularly for B2B firms, remain a complex area. Businesses operating globally face a fragmented payments ecosystem characterized by varying regulations, network infrastructures and levels of technological maturity across different markets.

These differences create friction, leading to lengthy settlement times and a lack of transparency in transaction costs and timelines. The intricate nature of cross-border payments also introduces various risks, especially when third parties are involved.

The basic principle behind cross-border payments — namely that the payee information is accurate — is a pain point, Nium Chief Payments Officer Alex Johnson told PYMNTS.

But as the demand for faster and more efficient cross-border payments continues to grow, future advancements in ledger technology will likely focus on achieving seamless interoperability between different systems.

“If you look at the cross-border payment space over the last five years, the payment volumes have grown,” Chandana Thanthrige of Bank of America told PYMNTS this month.

Read more: What on-Soil Requests Mean for Cross-Border Payments Compliance

Blockchain and Distributed Ledger Technology

On advance in ledger technology, blockchain, has long been held as a potential solution to traditional cross-border woes. The PYMNTS Intelligence report “Can Blockchain Solve the Cross-Border Payments Puzzle?” explored how blockchain could revolutionize cross-border payments, assessed its current adoption and examined the future implications for financial institutions and businesses.

Blockchain technology emerged in 2009 with the introduction of bitcoin, bringing a decentralized, transparent ledger to cross-border payments. Blockchain fundamentally differs from traditional ledgers because it operates on a distributed network of computers, with each transaction recorded across all nodes in the system.

This decentralized model addresses the inefficiencies of traditional payment systems by using distributed ledger technology (DLT) to provide several advantages for cross-border payments: it offers high security, eliminates reliance on intermediaries, and allows for real-time reconciliation without centralized oversight.

This approach can reduce costs and speeds up settlement times, with transactions potentially completed in seconds rather than days.

Concurrent advances in artificial intelligence (AI) and machine learning are also set to play a key role in optimizing cross-border ledger systems. Automated AI-driven systems can analyze transaction data across ledgers, flagging discrepancies, detecting potential fraud, and identifying inefficiencies in cross-border transactions. These advancements could lead to more resilient and accessible financial systems, benefiting large enterprises and small businesses engaged in international trade.

As technology advances and international trade grows more complex, the ledger’s role will remain unabated. Whether through traditional banking systems, blockchain networks, or new digital currencies, ledger technologies will continue to underpin cross-border payments, enabling businesses, individuals and governments to transact seamlessly in an interconnected world.