What practical applications of blockchain can treasurers monetise for cross-border payments?

Philip Panaino Global Head of Cash Management

9 Mar 2024

Blockchain brings about limitless possibilities, but what are its practical applications for corporate treasurers that can turn challenges in global financial management into scalable opportunities?

While the speed and cost for cross-border payment have improved dramatically for consumers over the past few years, corporate treasurers still grapple with manual, slow, and often costly processes. With operations spread across multiple countries, global treasury teams need to juggle different payment rails and regulations, tackle exchange rate fluctuations, and coordinate between multiple internal and external parties – but outdated systems mean they often don’t have the ability to be effective.

“Corporate treasurers face the consistent challenges of visibility, access and control of funds deployed all over the world,” says Philip Panaino, Global Head of Cash at Standard Chartered. “The prevalent model of global and regional treasury centres is a direct result of information lag and lengthy settlement processes, as well as a lack of a seamless workflow to sum-up available working capital, then trigger, free up and track payments. In today’s increasingly digital world, corporates now expect the same immediate, 24/7 seamless delivery of payments technology to their business as they see in their personal accounts.”

Recent advances have brought this expectation closer to reality. Real-time payments (RTP) systems that allow money to move almost instantly are being implemented across a growing number of markets, with cross-border linkages such as the Singapore-Thailand PromptPay-PayNow connection. Meanwhile, the move to ISO 20022 will allow richer data to travel with payments, addressing problems with fragmented information.

However, where the real transformation will come is through blockchain-enabled solutions, explains Panaino.

“Programmability through smart contracts is a key differentiator of blockchain-enabled payments compared to traditional and even more recent fast payment services,” he says.

Using Distributed Ledger Technology (DLT), treasurers would gain unprecedented control over working capital, liquidity and payment flows based on business rules and conditions, enabling the entire end-to-end process – from supplier payments to customer collections – to be automated and executed seamlessly in real-time across borders.

For example, a manufacturer could programme supplier payments that are released automatically once a certain performance threshold is met, or a retailer could have loyalty rewards distributed instantly based on real-time purchase data streaming to their blockchain application. This automation eliminates the need for treasury staff to manually verify documents, check metrics, and manually release transactions – saving significant time and costs in processing but also and possibly more impactful, for avoidance of “parking idle working capital” in anticipation of treasury needs.

This programmability also future-proofs treasury systems. Business conditions can change quickly, but with blockchain, payment logic can be easily updated by adjusting the underlying code – no costly legacy system upgrades required. This might mean a commodity trader who takes advantage of market prices can execute a transaction with the Just-In-Time (JIT) movement of capital where and when it is needed, in real time and at scale.

With the entire treasury function including cash, trade and risk management consolidated onto a single integrated blockchain-based platform through, for example, a API-based Treasury Management System (TMS), funding processes that currently take months could be reduced to seconds. “And that is only the beginning. The potential can extend to capital market activities such as fund raising, where the entire life cycle can be generated automatically: through ERPs and TMSs connected to a corporate borrower’s on-chain credit information, debt profile via an asset exchange clearing protocol. This provides institutional money (Asset Managers, Banks, Real Money funds) with live debt terms and conditions for immediate execution on-chain, replacing lengthy roadshows, long documents, and hosts of intermediaries such as legal firms, paying agents, and custody agents,” adds Panaino.

While all of this may sound too good to be true, banks like Standard Chartered are working, right now, to turn this into reality.

The Bank’s investment in Partior, a blockchain interbank clearing and settlement network, is one example. As a founding shareholder, Standard Chartered is the first Euro settlement bank for the platform, and the Bank is leveraging its global payments capabilities and clearing footprint to enhance Partior’s international reach.

“We’re accelerating our deployment of blockchain technology with Partior across our global wholesale payments and settlements network in preparation for the evolution of payment and cash management products across a universe of faster, better and more cost-effective capabilities,” says Panaino.

“We are creating products for a world where corporate customers’ ERPs and TMSs are on-chain,” he adds. “In this world, our clients will significantly reduce their dependence on third parties and be better able to capture immediate, low latency opportunities in their respective markets by being natively agile in the acquisition, use and storage of working capital.”

As the technology matures, those who get involved early will be best positioned to ensure solutions meet strategic treasury needs, and the time for pilots and experimentation is now. Corporate treasurers have a unique opportunity to proactively engage their banking partners and witness the technology in action with their own payment data and processes – be those supplier payments, FX hedging or accessing capital markets. Panaino calls on treasurers to speak to their banking partners on the possibilities of blockchain in cross-border payments and take part in pilots and proof-of-concepts to witness how the technology can benefit their unique business environment. Continued treasurer engagement and feedback will shape the development of production-ready solutions – and the potential rewards of streamlined operations, cost savings and new capital game changing opportunities.