Swiss bank UBS created and piloted UBS Digital Cash, a blockchain-based payment solution.
The new offering is designed to enable programmability of money movements for the bank’s corporate and institutional clients, UBS said in a press release on Thursday (November 7).
“Cross-border payments often lead to settlement delays,” UBS said in its press release.
“As a result, this creates a fragmented view of companies’ liquidity positions. The aim is to increase transparency and security through blockchain-based payments via UBS Digital Cash, which in turn should facilitate timely payment processing.”
Beyond this, businesses should be able to more easily manage intraday liquidity and adjust liquidity buffers on their accounts, with greater visibility into their total cash flow.
According to the release, the pilot project involved transactions with multinational clients and banks, including domestic transactions in Switzerland and cross-border payments in US dollars, Swiss francs, euros and Chinese yuan. The pilot project also included the transfer of cash between different UBS companies.
“We view interoperability between UBS Digital Cash and other digital cash initiatives as essential for the financial sector,” Xiaonan Zou, UBS Head of Digital Assets, Group Treasury, said in the release.
“In addition to their role as correspondent banking, they also have the potential to streamline and simplify the settlement of tokenized assets in the capital market.”
PYMNTS recently wrote about the benefits of blockchain-based payments in the face of typical cross-border payment issues such as high fees, slow processing times, and inefficiencies associated with reliance on correspondent banks and clearinghouses.
“For example, cross-border consumer payments often result in bank fees exceeding 11% on average, which can erode the value of small transactions,” this report states.
“B2B payments are impacted, with fees averaging 1.5% and processing times of up to several weeks. Nearly half of Citibank’s business customers identify high costs as a problem, and 59% cite slow speeds as a problem.
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 able to be completed in seconds rather than days.
PYMNTS Intelligence research indicates that permissioned decentralized finance (DeFi) could reduce transaction costs by up to 80% compared to traditional methods, while features like automated record keeping and smart contracts improve transparency and efficiency, while stablecoins, linked to fiat currencies, compensate for volatility. concerns.
