A credit union consortium is working on a blockchain-based payments tool aimed at serving 89,000 credit unions globally.

CULedger, a group of credit unions working on distributed ledger technology, today launched a partnership with enterprise software firm R3 on a cross-border payments tool built on its Corda blockchain platform, called CUPay. The goal is a cross-border payments mechanism that’s cheaper, quicker and more secure than the current model of going through intermediaries.

“With cross-border payments, there are [currently] a lot of players, and there’s a cost to that process,” said Julie Esser, chief experience officer at CULedger, in an interview with Bank Innovation. “Through a decentralized approach leveraging blockchain, you can reduce those problems and make it more efficient because there’s no centralized authority in the middle.”

Through CUPay, CULegder will help solve a longtime cross-border payments problem: it takes days for transactions to finalize, and it’s expensive. The traditional foreign exchange system’s “nostro accounts” problem is a headache for financial institutions and consumers because correspondent bank accounts add time and generate holding fees.

With a blockchain-powered cross-border system, however, the payments happen almost instantly, cost less and are safer than traditional methods.”What a decentralized system does is eliminate the intermediary, and that’s where the security breaches happen,” Esser said. “With distributed ledger technology, there are immutable records on a series of databases called nodes, and every transaction is recorded.” She added that CUPay is additive to existing infrastructure and won’t replace existing payment rails.

Erika Baumann, senior wholesale banking analyst at Aite Group, said solutions like CUPay are part of the industry’s ongoing efforts to eliminate friction from cross-border payments.

“Historically, businesses with greater volumes of international transactions would need to seek out a top-tier international bank to accommodate. However, it is not just large international corporations that have pain points and need for cross-border payments,” she said, in an email to Bank Innovation. “This partnership demonstrates the commitment and ability for more frictionless cross-border payments in the credit union space.”

R3 isn’t the only player working on cross-border payments through blockchain. Ripple and IBM have developed cross-border payments solutions for banks and financial institutions, and Circle, through Circle Pay, uses the technology for payments across borders.

CULedger joined R3’s global network in 2018. In addition to cross-border payments, CULedger also is working on blockchain-based solutions for digital identity management and trusted value systems for settlement, loyalty and rewards.