Off The Rails: Can Regulation Help Blockchain Deliver Faster X-Border Payments?

Is the world getting flatter?

In short, no. But thanks to faster cross-border payments solutions, the distance between nations across the world is shrinking considerably.

According to the most recent figures available from the U.S. Census Bureau, trade between the U.S. and the U.K. was valued over $100 billion in 2016. With billions of dollars in trade on the line, maintaining a faster route for funds to travel is essential to both countries.

Payment solutions powered by blockchain technology are showing promise in getting payment delivered across borders at a much faster rate. But with so many unknown questions about how the technology functions, greater regulation may be required to help governments and the public trust and accept it.

To help facilitate the exchange of money between the U.S. and the U.K., Align Commerce recently launched a blockchain-powered payment rail to help businesses send and receive money faster. Align’s payment rail extends to over 60 countries in North America, Europe and Asia.

For the January X-Border Payments Optimization Tracker™, PYMNTS spoke with Marwan Forzley, CEO of Align Commerce, and Frederick Crosby, Align’s chief revenue and marketing officer, about how a payment rail system could improve the flow of trade between the U.S. and the U.K. and why they believe the technology should be regulated.

Rewiring an old system

Forzley said Align saw the need to develop the payment rail because existing payment infrastructures offered by banks are outdated and often slow the delivery of payments across international borders for smaller merchants.

“Business payments for SMBs are overly complex and expensive,” Forzley said.

The complexity of the banks’ networks and systems can also lead to higher fees for smaller businesses, he said.

“At its core, you’re depending on a maze of bank networks that add more costs with every touch and an inability to track your payment once it leaves the initial bank,” Forzley said.

He believes Align’s payment rail offers a way for SMBs to bypass traditional bank infrastructure by creating an “express lane” that offers communication between both the sender and receiver and greater transparency over the entire payment transaction.

Since deploying the payment rail, Crosby said Align saw “unparalleled” growth in the last two months of 2016. He hopes Align’s rail solution will make it easier for companies to complete their business.

“We’re putting our own stake in the game so that, if you go out there and stop doing what you had been doing, stop the inertia of wasting money and going through pain, we’ll be there right with you and offer you something tangible back,” he said.

An edge for SMBs?

Crosby believes small to medium-sized businesses stand to gain the most from solutions like the payment rail. He estimates 20–30 percent of small businesses have some kind of cross-border business contact already and are actively engaged with cross-border merchants.

“One of the things we talk a lot about is how very quietly the small business owner has gone global,” he said.

While small businesses can easily access other tools that can make cross-border trade progress more easily, Forzley pointed out that the availability of effective payment solutions have lagged behind other tools that help merchants, such as translation services.

“Small businesses have seen a lot of technology advancements in building out customer bases and supply chains overseas except when it comes to global payments,” Forzley said.

He expressed optimism that solutions like Align’s multirail payments platform will help address that shortfall for smaller players in the global commerce space.

“[We] have built a simple way for the SMB to get their payments to their global partners quickly without the high wire fees that banks impose,” Forzley said.

Regulation required

For the blockchain-powered payment rail to catch on, both Forzley and Crosby believe greater regulation needs to be put in place in order to build consumer trust.

While the thought of new layers of oversight and regulation might make some people uncomfortable, Forzley pointed out that greater oversight is necessary to protect both ends of the transaction process.

“Some people fear regulation as undue friction, and if it’s poorly thought-out rules, that can be true,” he said. “But international payments [are] a very sensitive area that is open to abuse. The best chance for blockchain to grow and be embraced by the larger market is if there is supporting regulation that comes with it.”

He said Align follows all regulations behind international payments in order to help customers feel secure about using the company’s service. By applying strong regulations, consumers will become more comfortable with the technology, which will help the broader payments industry.

“The industry will benefit from that same sense of consumer security if smart regulations are applied here as well,” Forzley said.

Crosby also believes this level of oversight will help reduce the “false uncertainty” that surrounds the blockchain system and create more opportunities for businesses and consumers to tap into the technology’s potential.

“The more regulation we have, the more people will feel like, ‘Hey! I can use this technology for good,’” Crosby said. “It will make it more efficient to get banks to open up into various countries and accept the technology.”

Greater regulation of payment rail technology will also encourage other countries to trust the solutions, Crosby said. As the technology gains traction, he sees more opportunity to educate consumers and businesses about how it works, which can help it gain further acceptance.

“It can really help make this more mainstream in a more rapid rate,” he said. “I think regulation is where we’ll eventually need to go with any innovative service.”

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ABOUT THE TRACKER

The PYMNTS X-Border Payments Optimization Tracker™ is the framework for evaluating players in the cross-border payments landscape, and the quarterly index tests the readiness of the companies to serve a global audience.