Businesses that make international payments often deal with long settlement times, unpredictable costs, and limited visibility into the status of transfers. These factors can affect relationships with suppliers, international trade operations, and payments to employees and partners in other countries.
Many of these limitations are associated with the traditional international transfer model, which relies on the SWIFT network to connect financial institutions through correspondent banks.
In recent years, the development of financial infrastructure built on blockchain has introduced a new alternative. By reducing the number of intermediaries involved in a transaction, this model can speed up settlement, increase transparency, and make costs more predictable.
In this article, you'll learn how SWIFT and blockchain work, the key differences between these infrastructures, and what factors to consider when choosing the right solution for each international payment.
How Does SWIFT Work?
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a messaging network used by financial institutions to exchange payment instructions. Rather than moving funds directly, it enables banks in different countries to communicate and facilitate international transfers.
In most cases, a transaction passes through a chain of correspondent banks before reaching the recipient. Along the way, each institution may perform checks, charge fees, and add time to the settlement process.
The Limitations of the Traditional Model
Because a transfer can involve multiple intermediaries, SWIFT payments can take two to five business days to complete. In addition, some fees may be deducted along the way, making it difficult to predict the total cost before the payment is completed.
For businesses moving funds across countries, this combination of longer settlement times, less predictable costs, and limited visibility into transfer status can affect cash flow and reduce the efficiency of financial management.
How Does Blockchain Work?
In blockchain-based infrastructure, international payments are settled through distributed networks, reducing reliance on correspondent banks. In general, the process takes place in three steps:
1. Converting the Funds to a Stablecoin
The payment amount is converted into a stablecoin, a digital asset pegged to a fiat currency such as the U.S. dollar. This reduces volatility compared with other cryptocurrencies.
2. Transferring the Stablecoin on the Blockchain
The stablecoin is transferred across the blockchain network to the entity responsible for settlement in the destination country.
3. Settling in Local Currency
The funds are converted into the local currency and sent to the recipient through the payment infrastructure available in the destination country, such as Pix in Brazil.
By reducing the number of intermediaries involved, this model can speed up settlement and make costs more predictable.
Key Benefits
Faster settlement: Transfers can be completed within minutes, reducing wait times compared with traditional methods.
Greater cost predictability: With fewer intermediaries, fees tend to be more transparent and, in many payment corridors, more competitive.
Traceability: Transactions are recorded on the blockchain, making financial reconciliation and auditing easier.
24/7 availability: Blockchain networks operate continuously, without depending on financial institutions' business hours.
Limitations and Considerations
Blockchain-based infrastructure does not replace SWIFT in every situation. Its adoption depends on factors such as liquidity availability, local settlement partners, and coverage across the payment corridors a business needs.
It is also important to work with properly authorized institutions. In Brazil, the Legal Framework for Crypto Assets and regulations issued by the Central Bank of Brazil establish requirements for companies providing virtual asset-related services. Working with partners that comply with this regulatory framework helps reduce risk and improve operational security.
SWIFT vs. Blockchain: How to Choose
The choice between SWIFT and blockchain depends on the company's needs and the characteristics of each international payment. Key factors to consider include:
Settlement urgency
Liquidity availability and local partners across the relevant payment corridors
Costs and fee predictability
The need for transaction traceability and visibility
Regulatory and compliance requirements
Transfer volume and frequency
A blockchain-based infrastructure can therefore be a good option for businesses that make frequent international payments or want to reduce settlement times, improve cost predictability, and simplify payments across countries.
Common use cases include payments to international suppliers, payments to overseas employees and partners, fintechs, payment companies, and global businesses that move funds across multiple markets.
That does not mean every international payment should use this model. In some corridors, SWIFT remains the more appropriate option, particularly when there is not yet enough liquidity or sufficient local partners to settle funds in the destination currency.
There is no single approach that works for every international payment. SWIFT and blockchain have different characteristics and can be used together depending on the business's objectives and the markets involved.
What to Consider When Choosing a Solution
Many businesses combine both models depending on the characteristics of each payment. While SWIFT offers broad global coverage, blockchain can improve efficiency for transactions that require faster settlement and greater cost predictability.
In many cases, the best strategy is not to choose exclusively between SWIFT and blockchain, but to use each model according to the type of payment, the countries involved, and the company's objectives.
When evaluating a provider, consider factors such as payment corridor coverage, liquidity availability, regulatory compliance, integration capabilities, security, and support for international expansion. These factors can help businesses build a more efficient, scalable payment strategy that is ready to support growth across markets.
Explore Transfero's international payments solution to simplify global transfers through infrastructure built to operate across different markets.
