Our Mission is to Establish a Robust Payment Infrastructure, Enabling Overseas and Interregional Companies to Effortlessly Expand into Latin America: Tilmar Goos of SulPayments

Tilmar Goos, CEO of SulPayments, possesses a wealth of experience, spanning business management, finance, legal matters, regulatory affairs, and IT. Since 2016, Tilmar has been deeply involved in the blockchain and cryptocurrency space, contributing to major projects in Switzerland, Liechtenstein and abroad. His multifaceted expertise has earned him recognition as an expert by both Frauenhofer and the EU Horizon Research and Innovation Programme in 2020.

In 2021, he published his book “Banking, Bitcoins & Taxation - The Handbook of International Money Management and Digital Assets”, which was one of the first bitcoin and banking related books in the industry. His academic research at the Ph.D. level led him to become the Chairman of the Working Group Education of the Crypto Valley Association. In this role, he initiated the Crypto Valley Research Journal, an annual publication featuring peer-reviewed research articles by industry professionals and academics, aimed at addressing current challenges and inefficiencies in the field.

SulPayments is a Swiss financial intermediary specializing in stablecoin cross-border payments with focus on Latin America. The company has a distinguished team of seasoned specialists who have been instrumental in reshaping the payments industry. With a keen focus on innovation, SulPayments has embraced advanced technologies to facilitate seamless cross-border transactions in the region. The company caters to various sectors including e-commerce, online gaming, crypto exchanges, and money remittance services.

SulPayments was founded in 2022 and is based in Fribourg. It has additional offices located in Chile, Colombia, Peru, and Mexico.

SME Business Review contacted Mr. Goos for an interview, and here’s what he had to say.

“Our mission is to create a payment bridge for international and regional companies to grow in Latin America, providing their customers with the latest trends in local payments augmented by the efficiency and stability of stablecoins.”

Mr. Goos went on describing how integrating blockchain technology enhances cross-border payments.

Embracing Cryptocurrency Payments

Meeting customer demand for cryptocurrency payments has become essential for businesses aiming to broaden their market reach and appeal to diverse demographics, particularly those underserved by traditional banking systems. With an estimated 420 million cryptocurrency owners globally, a significant portion of the population, there is a clear trend towards embracing digital assets beyond mere investment vehicles. Notably, 93% of cryptocurrency holders express their readiness to engage in purchasing activities using their digital assets.

In response, numerous prominent brands and retailers, including Starbucks, Tesla, Nordstrom, Whole Foods, Gucci, Balenciaga, and Tag Heuer, have integrated cryptocurrency payments into their operations, recognizing the strategic importance of aligning with evolving consumer preferences. This adoption has yielded tangible benefits, such as acquiring new customer segments, with up to 40% of cryptocurrency-paying customers being first-time patrons. Additionally, transactions conducted via cryptocurrency typically exhibit higher value compared to traditional credit card transactions.

This trend underscores the necessity for businesses to proactively respond to changing consumer behavior by incorporating cryptocurrency payment capabilities into their strategies. Doing so not only enhances market penetration and customer engagement but also fosters sustained growth in a rapidly evolving marketplace.

Integration of Blockchain in Cross-Border Payments

Blockchain technology is revolutionizing cross-border payments, offering a superior alternative to outdated banking systems that struggle with inefficiencies and high costs. Traditional methods are hindered by fragmented systems and intermediary layers, leading to delays and financial exclusion for many. In contrast, blockchains and cryptocurrencies provide continuous operation, minimal transaction costs, and complete settlement, accessible to anyone with internet connectivity. Despite their security and efficiency, blockchain solutions face challenges, including cryptocurrency volatility and an evolving regulatory environment. The complexity of blockchain technology, including concepts like keys and wallets, can also hinder adoption.

Fintech companies are crucial in easing this transition, offering expertise and streamlined solutions to mitigate risks and facilitate smoother integration of blockchain technology in cross-border payments.

An Analysis of the Current State of the Industry

Cross-border transactions are a significant application of blockchain technology, evidenced by their contribution to 44% of global blockchain revenue from payment applications in 2022. This highlights blockchain's significant role in payment systems, especially for cross-border transactions. Future projections emphasize this growing significance, with the global crypto payment gateway market expected to reach $5.4 billion by 2031. Juniper Research forecasts that blockchain-based B2B cross-border payments will account for 11% of total B2B international payments by 2024. The blockchain payment landscape is evolving rapidly, with both traditional financial institutions and FinTech innovators driving progress. Visa B2B Connect, launched in 2019, and Mastercard's blockchain-based solutions through Mastercard Send, demonstrate the integration of blockchain into mainstream financial systems, enabling seamless global transactions without traditional card-based mechanisms.

Stablecoins, cryptocurrencies pegged to assets like fiat currencies, have become crucial in the blockchain payments ecosystem. With a market cap exceeding $151 trillion, daily trading volumes over $50 billion, and 2022 settlement volumes around $8 trillion, stablecoins are set to surpass major card networks like Mastercard and American Express in transaction volumes by the end of 2023. This highlights their disruptive potential in global payments. Additionally, Central Bank Digital Currencies (CBDCs) offer another blockchain-based solution for cross-border payments. Issued by central banks, CBDCs provide enhanced regulatory oversight and security, making them a viable option for international transactions. Over 100 CBDC projects are in various stages worldwide, indicating their importance in the future of blockchain-powered payments.

Put simply, blockchain technology is revolutionizing cross-border payments through innovative solutions like stablecoins and CBDCs. The growing adoption and integration of blockchain in financial systems highlight its potential to reshape global payment paradigms, driven by efficiency, security, and expanding market demand.

Understanding the Mechanisms of Blockchain in Cross-Border Payments

Blockchain technology, while not inherently designed for payments, offers a robust platform for various applications, including payment systems. One of the distinguishing features of decentralized blockchains is their territory-agnostic nature. Unlike traditional banking infrastructures, blockchain-based payments enable direct transactions between the payer and payee, irrespective of their geographic locations. Below, we interpret a typical consumer cross-border payment journey facilitated by blockchain technology:

Merchant Interaction: The consumer encounters a crypto payment option at the checkout or payment gateway provided by the merchant.

Selection and Confirmation: The consumer selects the crypto payment option, chooses the preferred digital currency for payment, agrees upon the exchange rate, and receives a public address for the merchant.

Wallet Transaction: Using their crypto wallet, the consumer sends funds to the merchant's public address while also covering the blockchain's processing fee.

Transaction Submission: The transaction request is transmitted to the blockchain and undergoes validation by network nodes to ascertain the availability of sufficient funds.

Block Inclusion: The validated transaction is included in a block awaiting validation by miners.

Validation and Approval: Typically, a transaction is approved once it has been validated by three nodes and certified within a block.

Transaction Completion: Upon validation, the transaction is finalized and recorded on the blockchain ledger.

This payment process leverages several inherent features of blockchain technology, including:

Decentralization and Accessibility: Unlike centralized payment networks, blockchains operate without a single controlling authority, allowing universal access to participants with an internet connection and compatible devices.

Trust via Consensus: The involvement of nodes, miners, and consensus mechanisms eliminates reliance on a central authority, relying instead on the collective incentive of users to ensure system integrity and security.

Built-In Redundancy: With thousands of network participants maintaining copies of the blockchain ledger, blockchain systems exhibit inherent redundancy, ensuring operational continuity even in the event of node failures.

Transparency: Public addresses facilitate transparent tracking of transactions from inception, enabling businesses to analyze transaction data comprehensively.

Encryption: Blockchain transactions utilize encryption techniques to anonymize and secure sensitive data, allowing parties to engage in transactions without disclosing personal information or relying on intermediaries like banks.

Stablecoins in Cross-Border Payments

While blockchain technology has gained traction in consumer payments, its application in business payments and cross-border settlements has also garnered significant attention. Businesses are increasingly utilizing blockchain technology to facilitate various financial transactions, such as inter-corporate fund transfers, repatriation of funds from emerging markets, and foreign exchange transactions. Central to these endeavors are stablecoins, digital currencies designed to maintain a stable value, thus mitigating the risk of price volatility inherent in many cryptocurrencies.

To explain the operational dynamics of blockchain-enabled cross-border settlements utilizing stablecoins, we explore three primary methods through which international businesses can leverage stablecoins:

Settlement in Stablecoins: In this scenario, funds denominated in local fiat currencies are settled directly in stablecoins, eliminating the need for currency conversion.

Fiat-to-Stablecoin Conversion: Businesses initiate transactions with funds in their local fiat currency, which are then converted into stablecoins before settling in other fiat currencies such as USD, GBP, or Euro.

Settlement in Fiat Currency via Stablecoins: Transactions are conducted using stablecoins or other cryptocurrencies, with settlements ultimately denominated in fiat currencies like USD, GBP, or Euro. For instance, consider the process of an FX business executing a fiat-to-fiat conversion using stablecoins:

● Account Setup: The customer, whether an FX/CFD broker or corporate treasury entity, establishes an account with a FinTech platform specializing in blockchain-enabled cross-border settlements.

● Transaction Initiation: The customer submits a request to transfer funds between entities located in different countries through the platform's over-the-counter (OTC) desk.

● Quote Acceptance: Upon receiving a quote from the platform, the customer accepts the terms and conditions for the fund transfer.

● Fund Deposit: The platform instructs the customer to deposit the requisite funds into a partner bank account located in the country of origin.

● Conversion to Stablecoin: The partner bank converts the deposited funds into a stablecoin, such as USDT, and initiates the transfer to the platform via blockchain technology.

● Fiat Currency Conversion: Subsequently, the platform converts the stablecoin into the fiat currency of the recipient country, depositing the converted amount either directly into the recipient's bank account or within a designated currency wallet on the platform.

The aforementioned process illustrates a practical application of stablecoins in facilitating cross-border payments, underscoring the pivotal role of FinTech platforms and distributed ledger technology (DLT) partners in streamlining international financial transactions.

Effortless, Fast, Compliant Settlement

The process of settling international financial transactions through conventional banking channels such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT) often entails significant time lags, especially when dealing with emerging markets. Consequently, finance teams frequently encounter the necessity of resorting to pre-funding arrangements or face cash flow constraints. In contrast, settlement operations facilitated by blockchain technology offer the potential for nearly instantaneous transactions, operational around the clock. It is worth noting, however, that additional time may be required if conversion to fiat currency from cryptocurrency is desired. This expedited settlement capability presents an opportunity to mitigate the cash flow disjunction between expenditure and revenue streams inherent in commercial transactions.

Leveraging distributed ledger technology (DLT), such as blockchains, can expedite the process of transferring funds from Brazil to Europe.

Securing Transactions

Blockchains serve as a proven technology for securely facilitating transactions involving cryptocurrencies, both in small and large amounts, on a daily basis. The substantial volumes transacted daily on major blockchains underscore their reliability and trustworthiness. According to a report by venture capitalist fund a16z crypto, the total number of blockchain transactions has surged by over 50% in the past two years. Cryptocurrencies and blockchains employ encryption techniques to ensure transaction anonymity and security. Utilizing blockchain cryptography, parties can conduct transactions without divulging their personal information or relying on intermediaries such as banks.

Enhanced Transparency and Traceability

While maintaining confidentiality regarding personal information, blockchain transactions offer traceability through public addresses and immutable records. This affords a high level of visibility regarding payment status, aiding payment reconciliation, financial record-keeping, and analysis. A distributed public ledger also serves as a potent tool for tracking fund provenance and identifying/preventing illicit payment activities.

Cost-effectiveness

Blockchains enable straight-through processing between payers and payees, although third-party entities like wallet providers and FinTechs are often involved. In contrast, traditional cross-border payment systems may necessitate multiple intermediary banks, also known as corresponding banks, which prolong settlement times and incur additional costs. One study suggests that blockchain-enabled cross-border payments could save businesses up to $10 billion by 2030. While converting between fiat currencies, known as on- and off-ramping, entails additional expenses, significant savings can still be achieved based on the provider and currencies involved.

Addressing Volatility and Ensuring Price Stability

For finance teams managing digital assets, the volatility risk associated with fluctuating prices poses a challenge. However, the emergence of stablecoins pegged to assets such as dollars has helped mitigate this risk. Despite occasional instances of stablecoins temporarily losing their peg, major asset-backed stablecoins (e.g., USDT) have demonstrated their utility, boasting a market capitalization of approximately $150 billion and daily trading volumes of $50 billion. This makes them an appealing option for finance and payment teams. Many businesses opt to collaborate with partners who collect cryptocurrency on their behalf and settle them in fiat currency.

Technical Proficiency

Blockchain payments necessitate a certain level of technical expertise and familiarity with digital wallets and cryptographic keys. The complexity of the user experience, particularly in securing private keys and protecting digital wallets, can serve as a barrier to widespread adoption. Engaging with an experienced payment partner can alleviate these challenges.

Regulatory Compliance

Given that blockchain payments traverse borders and involve digital assets, they raise regulatory and compliance concerns. Governments and financial institutions are still formulating frameworks to regulate and monitor blockchain payments, including anti-money laundering (AML) and know-your-customer (KYC) requirements. As not all regulatory bodies view blockchains and cryptocurrencies favorably, businesses must adhere to the regulations specific to each market. Although regulatory approaches may vary and be inconsistent at present, we can expect to witness convergence in regulation around digital assets and their integration into the mainstream global financial system in the foreseeable future.

Final Thoughts

The blockchain payments industry is rapidly growing, significantly enhancing cross-border transactions with faster settlements, reduced costs, and heightened security. This technology is poised to revolutionize international business payments and fund transfers. With increasing adoption by financial institutions and customers, evolving regulations and continuous innovations improving speed and scalability, the future of blockchain in cross-border payments looks promising. Over the next decade, the market will likely see no single dominant player, instead expanding to accommodate various rails suited to different use cases and risk preferences. This competitive environment will spur innovation and new blockchain services. Simplification will be key with treasury and finance teams aiming to efficiently manage both digital and traditional currencies on a unified platform. As businesses explore these opportunities, a gradual transition will occur, with traditional and blockchain-enabled cross-border payment methods coexisting.

Tilmar Goos, CEO, SulPayments

SulPayments, authorized by VQF SRO, scales businesses within a robust compliance framework, ensuring strong adherence to local regulations in both crypto and fiat.