Problems of cross-border payments - why and how blockchains are used here

    Next year, the telecommunications operator LG UPlus, in partnership with companies from Japan, the USA and Taiwan, will begin testing the blockchain-platform CCPS (cross-carrier payment system) for cross-border payments. It is designed to reduce the fee for the transfer of funds.

    / PxHere / the PD

    How cross-border payments work

    Cross Border Payment - these are financial transactions that are carried out between organizations located in different countries. Banks are usually responsible for this by organizing a procedure for transferring information about users using systems like SWIFT . SWIFT does not transfer money, it sends messages with information about transactions between banks. This approach, although it has been operating for almost half a century (SWIFT was established in 1973), still has several disadvantages:

    • High commissions. A user, whether a company or an individual, is charged a fee for the transfer of funds. Given that this is a multi-stage process and the user's money passes through several banks and payment systems , each of which can take its own “share”, the final amount of the commission can be quite impressive.

      At the same time, banks and payment systems work with personal data of users, because recently they have to spend extra efforts on meeting the requirements of GDPR . In theory, this could result in increased commissions to cover the costs of introducing new systems and tools.
    • Translation is a long time. Transactions are slow because the approval at the banks of the sender and the recipient takes several hours or even days. This is partly due to the "fatigue" of the technologies used. The same SWIFT was originally based on Telex technology . Other translation service providers also base their work model on telex or even telegraph.
    • There is a threat to data security. According to the ThreatMetrix study , in the first quarter of 2018, attackers conducted a billion organized bot-attacks on payment systems. At the same time, cybercriminals attacked cross-border payment systems 30% more often than “local” banking.

    How can a telecom operator solve these problems?

    The telecommunications operator LG UPlus has begun work on a cross-border payment blockchain platform CCPS, which solves at least some of these difficulties. CCPS operates in the networks of mobile operators and performs cash transactions in real time.

    Thus, it is assumed that the platform will speed up transactions between customers of different mobile operators and eliminate the commission. LG UPlus has already entered into a partnership agreement with the Far EasTone Telecommunications telecom company from Taiwan and the Japanese operator SoftBank.

    The blockchain platform itself is being developed by an American startup from Silicon Valley, TBCASoft. The payment system will operate using the Rich Communication Services ( RCS) protocol.) - this is an advanced analogue of SMS, which can transmit multimedia data and conduct service discovery . The protocol was already tested by SoftBank in mid-September for P2P payments between mobile operators.

    According to SoftBank representatives, at the expense of RCS, customers of the companies mentioned will be able to buy goods and services using the application on a mobile gadget while traveling in Taiwan, Japan and South Korea. In this case, they do not have to change the currency in the bank.

    / Wikimedia / Santeri Viinamäki / CC

    The launch of the system is scheduled for 2019. But in fairness, we note that its global implementation is still far away. For this, the blockchain technology is not yet widely spread, and only individual companies are working on its development in the telecom industry. For example, the corresponding consortium - Carrier Blockchain Study Group (CBSG) - appeared only last year.

    Similar solutions

    IBM is also engaged in the development of a system of cross-border transfers based on blockchains . The IT giant has deployed the system in its own IBM Blockchain cloud to create blockchain networks. The company plans to provide a platform for transferring money between countries in the Asia-Pacific region and the UK.

    KlickEx, a New Zealand-based company that provides financial services to the countries of Oceania, and Stellar, an organization that developed an open source blockchain platform for financial services, are working with IBM on the project.

    Stellar is also developing a joint project with TransferTo. They plan to provide a system for the transfer of money abroad using mobile networks for residents of 70 countries.

    The participants of the CBSG consortium (LG UPlus is among them) note that such payment systems are just the starting point for the distribution of blockchain solutions in the telecommunications industry. Next, the company will develop systems for the identification and authentication of users.

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