Simplifying Cross-border Payments – Can Stellar Pull It Off?


The global transfer of funds is among various points that hugely benefits from the digitization of payments systems. While banks and financial institutions play a crucial role in cross-border payments, it is also a fact that the service becomes too intricate to avail at times but has started to change after blockchain-powered networks and cryptocurrencies came into existence.

The possibility of sending or receiving money anywhere in the world over the Internet is now a reality. Stellar is one such powerful blockchain platform capable of executing cross-border payments. The network relies on the distributed ledger network, which ensures seamless, secure, and low-cost transactions.

Stellar is exceedingly popular in developing countries where most people do not have access to banks, with the remittance sector being the only medium of fund exchange in these regions. Globalization and the crypto revolution will increase the demand for cross-border payments, necessitating international payments management.

With its efficient peer-to-peer payment infrastructure, Stellar aims to enable unbanked individuals to avail financial services by having access to nonexistent banking services. For it to happen, the network interconnects the domestic payment infrastructures and expands cross-border payments systems.

Started in 2014 by Jed McCaleb, Stellar equips people with its native cryptocurrency, Lumens or XLM, to take advantage of the payment solution. What is more, XLM allows users to exchange their tokens for fiat currencies or digital assets by utilizing its in-built currency exchange platform. 

Challenges Of Traditional Cross-Border Payments

International payments made it feasible for people and businesses to transact money across the borders. It has been the traditional means of fund exchange for a long time. The intermediaries involved in cross-border payments include banks, financial institutions, and institutional payments services. For every transaction made, these intermediaries charge fees at their ends that contribute to transaction costs.

As the payment goes through different territories and institutions, the entities need to comply with regulations and requirements that delay processing. Plus, entities keep tracking and recording transactions separately, making them vulnerable to hacking. Below are some more common problems inherent in traditional cross-border payments.

  1. Inefficient SWIFT Messaging Network: The traditional international payments system utilizes the Society of Worldwide Interbank Financial Telecommunication (SWIFT) messaging network. SWIFT consists of financial institutions and banks that communicate money transfers with each other using SWIFT codes. But the problem with SWIFT messaging is the limited information exchange that makes it inefficient.
  2. High Transaction Cost: Numerous intermediaries come together to execute an international transaction and take an additional fee for doing so. Usually, the banks have a relationship with the correspondent banks and share commercial accounts for cross-border payments. An intermediary bank facilitates the transaction in case banks do not have commercial accounts. Either way, a fee gets added to the transaction costs, depending on the transaction volume and entities.
  3. Less Secure And Transparent: In a fiat currency-based transaction system, everything goes public due to the lack of a shared digital ledger. The centralized nature of payment requires customers to share their personal and financial data with the intermediaries before sending the money. Moreover, institutions can track their transactions, but senders or recipients cannot. Not only does it create transparency issues, but it also increases the risks of information theft through hacking.
  4. Slow Processing Time: The cross-border payments involve lots of channels and checks, causing the fund transfer to take longer than expected. The variables that can result in delayed payment processing might include incomplete transaction details, lack of digitization, fraud and money-laundering checks, insufficient foreign currencies, and many more.
  5. Data Privacy Laws: Data privacy for cross-border payments processing is subject to banks, financial institutions, and jurisdictions. Although these rules and regulations protect consumer privacy, the necessity for entities to comply with them makes the entire process more complex.

How Stellar Overcomes The Challenges Of Traditional Cross Border Payments

  1. Decentralized platform: Stellar is decentralized, open-source, and free from regulations, which means no central authority controls the international fund transfers.
  2. Consensus Mechanism: The Stellar Consensus Protocol ensures verification of cross-border transactions.
  3. Low Fees: The absence of intermediaries results in little to no cross-border transaction fees.
  4. Instant Processing: Trustworthy blockchain nodes eliminate mining requirements that lead to faster (3-5 seconds) and scalable cross-border transactions (thousands in number).
  5. Secure: Cryptographic keys tamper-proof cross-border payments, and blockchain network prevents duplicated, altered, or reversible transactions.
  6. Transparency: The immutable digital ledger records the transactions and makes them visible to everyone.
  7. Anonymous: No KYC requirement (sharing of personal or financial details) enhances data privacy.


Stellar’s fundamental design can replace the outdated international transaction systems. Furthermore, the blockchain-powered payment platform has proved to be simple, fast, secure, cost-efficient, and transparent. Know more about the optimistic Stellar price prediction presenting the crypto community with a reason to rejoice. All these functionalities make Stellar a promising solution for transforming traditional cross-border payments.

About author


Jason Bailey is a financial journalist of EverCoinNews team and he is a strong believer of blockchain technology primarily because of how it reshaping the world economy and benefits of cryptocurrencies. He curates content for upcoming news stories of blockchain world and fintech industry. In his free time, he loves to explore new places and connect with influential people of crypto space.

Leave a Reply

Your email address will not be published. Required fields are marked *