J.P. Morgan Payments: AI, Blockchain and APIs Make Cross-Border Payments as Simple as Domestic Transactions

It’s no surprise that businesses and consumers continue to seek alternatives to traditional, costly and time-consuming methods for international payments, driving a growing demand for faster, cheaper and more efficient cross-border payment solutions. 

As their needs evolve, both consumers and corporates want their cross-border payment experience to mirror the same type of payment experience that they have in their domestic markets, J.P. Morgan Payments’ Naveen Mallela, managing director of Onyx Coin Systems, and Gayathri Vasudev, global head of cross-currency payments, told PYMNTS in a recent conversation. 

They explained that rapidly advancing technologies, like artificial intelligence (AI), blockchain, and application programming interfaces (APIs), are poised to play a crucial role in enhancing cross-border payment flows to match the ease of domestic market transactions, which is more reason why adopting them should no longer be considered a luxury, but rather an imperative.

“Some of these technologies need to be table stakes for businesses now,” Vasudev said, adding that “with high volume, low-value payments increasing, you need to be able to reduce the costs and the friction in the system, and you’re not going to be able to do that without technology.”

Vasudev explained that integrating machine learning and AI into every facet of payment processing, including tasks like automating repairs, eliminating false positives on sanctions, and continuous monitoring, ensures a seamless payment flow, allowing transactions to proceed smoothly in 99% of cases. 

When coupled with using APIs to offer real-time foreign exchange (FX) rates and payment tracking, these advancements have “the potential to completely transform cross-border payments,” she added. 

Another area where AI and machine learning have “found a lot of relevance” is cash flow and liquidity forecasting, Mallela further noted. However, he emphasized that alongside their applicability, developing event-driven infrastructure that can dynamically respond to real-time events is essential to complement AI-driven forecasting, ultimately enhancing adaptability in the financial landscape.

Blockchain and Efficient FX Settlement

Blockchain technology, as explained by Mallela, also holds great potential for cross-border payments. This transformation begins by shifting from the current practice where banks operate independent ledger systems, creating inconsistent data formats that make the entire process more complex and challenging to streamline.

“Shared ledger infrastructure can take the construct and turn it on its head by bringing banks together on a single unit, which means your debits and credits are all happening instantaneously with certainty and optimal liquidity,” Mallela explained, adding that the distributed nature of blockchain enhances transparency, trust and security in cross-border payments.

Mallela also highlighted blockchain’s pivotal role in facilitating liquidity marketplaces, particularly when addressing the complexities of quantitative tightening and liquidity constraints that hinder intraday liquidity sourcing. “You can actually source that liquidity on a peer-to-peer basis in a secured manner, using your currencies or securities as collateral. This notion of enabling liquidity marketplaces will become relevant,” he explained.

Since most cross-border payments involve multiple currencies, Mallela noted that enhancing FX settlement processes and accommodating more currencies beyond the 18 that the Continuous Linked Settlement (CLS) — a global payment system for FX transactions — can manage today will also be key.

“The ability to add more emerging market currencies and bring about real efficiencies in the settlement process is going to bring the much-needed improvements to cross-border payments,” he said. 

The Future Is Embedded Payments

Looking ahead, Mallela highlighted the role of digital currencies, including central bank digital currencies (CBDCs), tokenized deposits, and stablecoins, in ushering in the next wave of cross-border payment innovation. 

And it’s not just about virtual currencies, Mallela pointed out. “It’s also about digital identity solutions, it’s about KYC [know your customer] and utilities — all of these have to go hand in hand to ensure that there is an end-to-end uplift in terms of the user experience.”

Vasudev, on the other hand, predicted a shift towards embedded payments, where interest in cross-border and cross-currency transactions transcends the confines of treasury departments and instead becomes embedded into the business framework of every firm.

“Whether it’s a marketplace looking to make payments to sellers in 100 different countries or collecting money from different buyers or making payroll payments, we have to start thinking of payments, especially cross-border payments, as integral to the business model,” Vasudev said, adding that ultimately, the goal is to ensure that “cross-border payments almost act as if they are payments without borders.”