UBS Debuts Blockchain-Based Payments Tool Digital Cash

Switzerland-based bank UBS has created and piloted UBS Digital Cash, a blockchain-based payment solution.

The new offering is designed to allow for the programmability of money movements for the bank’s corporate and institutional clients, UBS said in a Thursday (Nov. 7) news release.

“Cross-border payments often lead to delayed settlements,” UBS said in the release.

“As a result, this creates a fragmented view of liquidity positions for companies. The aim is to increase transparency and security with blockchain-based payments via UBS Digital Cash which should in turn facilitate timely payment processing.”

Beyond that, companies should be able to manage intraday-liquidity and adjust liquidity buffers on their accounts more easily, with greater visibility of their total cash positions.

According to the release, the pilot involved transactions with multinational clients and banks, including domestic transactions within Switzerland and cross-border payments in American dollars, Swiss francs, euros and Chinese yuan. The pilot also included the transfer of liquidity between various UBS companies.

“We see the interoperability between UBS Digital Cash and other digital cash initiatives as key for the financial industry,” UBS Head Digital Assets, Group Treasury Xiaonan Zou said in the release.

“In addition to their role in correspondent banking, they also have the potential to streamline and simplify the settlement of tokenized assets in the capital market.”

PYMNTS wrote recently about the benefits of blockchain-based payments in the face of typical cross-border payment issues such as high-fees, slow processing times and the inefficiencies associated with depending on correspondent banks and clearing houses.

“For example, consumer cross-border payments often incur bank fees averaging over 11%, which can erode the value of smaller transactions,” that report said.

“B2B payments are impacted, with fees averaging 1.5% and processing delays up to several weeks. Nearly half of Citibank’s corporate clients identify high costs as a pain point, and 59% cite slow speeds as an issue.”

Blockchain technology addresses the inefficiencies of traditional payment systems by using distributed ledger technology (DLT) to enable direct transactions without intermediaries. This approach reduces costs and speeds up settlement times, with transactions potentially completed in seconds rather than days.

Research by PYMNTS Intelligence indicates that permissioned decentralized finance (DeFi) could reduce transaction costs by up to 80% compared to traditional methods, while features such as automated recordkeeping and smart contracts improve transparency and efficiency, while stablecoins, pegged to fiat currencies, offset volatility concerns.