You’ve probably heard this script before. Cross-border payments can take days to complete. New technologies such as blockchains, central bank digital currencies (CBDC), and stablecoins are supposedly on their way to speeding up the process.

Elon Musk is also on board. Musk said in a interview that the banking system was “still not real time” and “quite unefficient” last month. He suggested that his social networking site, Twitter, could do something to change this. His subsidiary Twitter Payments LLC just received the first money transmitter license from the state New Hampshire. This shows that Musk is serious about his business.


J.P. Koning is a CoinDesk Columnist. He was previously an equity researcher for a Canadian brokerage and a financial journalist at a major Canadian bank. He runs the Moneyness blog.

The script is flawed, as money transfer company Wise, formerly known as Transferwise, is an excellent example. , a London-based money transfer company, now processes 55 percent of its cross-border payment instantly. This is up from less than 10 percent in 2018. Wise does not rely on stablecoins or CBDCs to keep up with the times. It uses a boring, already-existing architectural framework.

The Wise Example suggests that those who would like to challenge the current infrastructure, such as Elon Musk’s Twitter or advocates of stablecoins, CBDCs and blockchains might need to update their view.

Take Elon for example. He helped to found PayPal in 1999, and knows a bit about the payment system. In a recent interview, Elon described the financial system as an heterogeneous set of databases which “slowly engages in batch processing.”

Musk missed the fact that real-time processing has increasingly replaced batch processing for retail payments. Under the old batching system that was in place when Elon worked at PayPal, retail payment instructions were gathered throughout the day to form a large batch. The entire batch of payments would be cleared and settled in the evening or on the next day. The money would only be released to the recipient after the payment has been cleared.

The batching process was efficient but slow.

The global payments landscape then entered a new era of change. Central banks started building a new generation in payments infrastructure, real-time retail payment systems.

Real-time Payments

These new retail payment systems are able to process retail payments instantly and on a first come, first served basis. These systems are available 24/7 by the central banks who offer them. These new public infrastructures allow banks and fintechs to provide 24/7 instant payment services.

Read more: Elon Musk’s Twitter, Crypto’s Town Square has a new CEO

Zengin was the first global real time retail system built by the Bank of Japan in 1973. However, the movement only really took off in the 2000s when Korea, Mexico and the UK increased their capabilities. India and China adopted real-time payments in the early 2000s. In 2017, the U.S. got its first instant payments system for retail in the form of Real Time Payments Network run by The Clearing House, a privately owned company. The Fed will introduce its FedNow payment network this summer, bringing the U.S. its second instant retail payments system.

A report from the BIS for 2021 shows that more than 60 jurisdictions have implemented real-time retailing systems alongside their batch retailing systems. It’s a huge improvement from the almost non-existent number of real-time retail systems when Elon worked in payments.

Wise’s ability to instantly move 55% its customers’ cross-border payments is due in large part to this new generation of real time retail payment systems. This is how it works.

Let’s say a customer of Wise in Ireland wishes to send 500 Euros to a relative in India. The money has to be transferred from the Irish account of the customer to Wise at another Irish Bank. This leg of the remittance used to take a few days in the old batch processing days. Target instant payment settlement, which was introduced by the European Central Bank in 2018, allows for a similar flow to occur within a matter of minutes.

Wise, having received the 500 euros from its customer, can proceed to the next step: sending 44,000 rupees (approximately $44,000) to the recipient. It will need to transfer money from an Indian bank account to the recipient’s. This meant waiting an extra day or two in the old batch processing days. Today, thanks to India’s Instant Payment Service, when Wise transfers 44,000 rupees into the bank account of a family member the payment is processed within seconds.

The Irish and Indian legs can now be processed much more quickly than in the past, when the lag was several days.

Wise will be able to settle more Wise remittances in real time as more and more countries implement real-time payment systems and Wise integrates with them.

What is blockchain?

This is not to say there isn’t room in the cross border payments landscape for stablecoins or blockchains. Yes, there is! This simply means the new competitors will need to update their opposition research. The traditional finance industry is not the evil that is often portrayed. The rebels must find other ways to distinguish themselves, as the technology already exists to make instant payments across borders.

This spreading bedrock of infrastructure for real-time that I have just described is not incompatible with new entrants. Elon will find that the real-time central bank systems have been a great resource for him to build a Twitter instant payments network.

Stablecoins and other blockchain-based products may also find it beneficial to be integrated in 24/7 central bank instant payment systems. Central bank instant payment systems could, for example, allow a DeFi investor to transfer $10,000 from their bank to a stablecoin on Saturday night at 11 PM to take advantage of an arbitrage opportunity. The funds would then be transferred back to their bank by 11:01 pm.

On top of the central bank’s instant rails, a thousand options for instant payments can be built.