Cross-border payment effects under open banking framework
Open Banking Transforms Cross-Border Payments
Open banking is revolutionising the cross-border payments industry, offering faster, more transparent, and cost-efficient transactions. Major payments players like Visa and Mastercard are making acquisitions to introduce open banking into their offerings, as more providers offer 'Pay by Bank' services.
The transformation is significant, with open APIs, data sharing, and technology integration enabling instant payment initiation and real-time currency conversion. For instance, stablecoin "sandwich" mechanisms can convert euros to USDT and then to local currency in emerging markets within minutes, dramatically reducing processing time and costs compared to traditional correspondent banking.
Open banking also fosters innovation, competition, and enhanced security in international payments. Regulations like PSD2 in Europe open cross-border payment services to third-party providers, increasing competition and enabling customers to initiate international payments directly from their bank accounts with enhanced transparency and security. Countries such as Australia, Canada, Singapore, and India are adopting or planning similar frameworks.
The emerging trend of interlinking national and regional payment systems creates a single connected network, enabling real-time settlement across countries with different payment infrastructures. This reduces friction by removing traditional intermediaries, simplifies currency exchanges, supports scalability, and fosters regulatory cooperation while preserving sovereignty.
Open banking also leverages digital assets and blockchain technology to streamline cross-border multi-currency transactions. This integration enables end-to-end transparency, reduces settlement times, and opens financial services to underserved populations, especially in emerging markets where traditional banking infrastructure is limited.
Advocates of open banking claim that it is transforming consumer payment methods and could eliminate challenges in the cross-border space, such as slow, costly, and non-transparent payments. Other regions around the world are now exploring regulation to promote open banking to meet the demand for faster, more convenient payments.
In summary, open banking is catalysing a new era in cross-border payments marked by higher speed, lower costs, greater inclusivity, and improved user control—trends expected to accelerate with enhanced regulation, blockchain adoption, and network interlinking globally.
Businesses in the finance sector, with the aid of technology, are leveraging open banking to transform cross-border payments. This innovation is making transactions faster, more transparent, and cost-efficient while fostering competition, promoting enhanced security, and streamlining multi-currency transactions with the help of digital assets and blockchain technology.
