Cross-border payments in their current form tend to be slow, costly and offer limited transparency and traceability.

Deploying blockchains — a technology used to maintain shared ledgers across a network of computers — could speed transfers, saving banks $10 billion by 2030, according to a recent report from U.K.-based research firm Juniper.

Players offering blockchain-based solutions, like RippleNet and Visa B2B, are already offering significant returns to financial institutions as compared to the legacy systems, the report noted.

“Ripple has already established a strong network of FI partners globally,” Susannah Hampton, senior analyst at Juniper, told Bank Automation News. However, other blockchain providers have also been seeing strong demand from banks globally, with a focus on cross-border remittance and applications related to identity verification.

Treating costs as a proxy for complexity, financial crime compliance represents the trickiest part of the puzzle in cross-border payments, Stephen Grainger, head of cross-border services at Mastercard recently told BAN. While the cost of building compliance mechanisms and implementing them tends to be high, it’s also a “cost of operating,” that’s hard to get around, he added.

Using shared ledgers spread across computer networks could help lighten that load, according to Juniper. “We anticipate that the use of blockchain in cross-border payments could potentially offer substantial cost savings for compliance in cross-border payments,” Hampton said.

These shared ledgers can be used to verify users’ identity without the need for centralized storage of identity documents, and know-your-customer information can be shared quickly and safely while adhering to regulatory requirements, the report noted.

Although using blockchain networks to conduct cross-border payments is one way for banks to reduce costs, early trials using central bank digital currencies (CBDCs) have also yielded positive results. Although a joint report by JPMorgan and consultancy firm Oliver Wyman found that a multicurrency CBDC could save corporates about $100 billion a year, their implementation remains distant.

“There is strong potential for their use in cross-border payments, but their use is still some way off — as there are no agreed standards, legal frameworks or established operating models in place,” Hampton said.

For now, the size of cost savings offered by implementing blockchain systems in cross-border payments and foreign exchange is attracting the attention of financial institutions and technology providers, including the $1.9 trillion Wells Fargo, Vanguard, and Finastra. But while some FIs might be keen to save on transfers, others are shying away from using this new form of technology, given the uncertainty generally associated with crypto assets, which are largely built using blockchain networks.

Therefore, “proof of cost savings through blockchain use will be critical for the technology to proliferate, as will fostering a culture of acceptance for the technology from the top down,” Hampton said.