Cross border payments, a term used to refer to transactions between two or more jurisdictions, is undergoing a transformation. While the world still heavily relies on third-party intermediaries, merchants and legacy technologies, blockchain is gradually taking over, with stablecoins growing popular as an alternative medium for cross border transactions.

AUDD offers an instant payment medium for seamless cross-border payments

An issue for the existing cross border payment method is the time lags between transactions. Several counterparties must verify and confirm transactions, making them last several days to complete. Transactions enabled by stablecoins like AUDD are instant since they take place on the blockchain.

A key feature of AUDD for cross border payment deployment is its compatibility with the Stellar ecosystem. Stellar is an open network that connects both worlds of finance – fiat and digital. This is a vital element feature for cross border payments, which are yet to go fully digital.

AUDD on Stellar allows users to deposit and withdraw fiat currencies to facilitate their cross border transactions. That’s an added advantage for on/off ramp transactions as traditional currencies still remain crucial in cross border payments. The exciting feature is that AUDD users can transact securely, conveniently and cost-effectively without leaving the Stellar network.

AUDD to solve interoperability problems in cross-border transactions

Fragmented financial systems and infrastructure have, for a long time, hindered cross border payments. The challenge emanates from the fact that payment protocols and services have varying needs and pursue different strategies to achieve their objective. Blockchain and stablecoin solutions are nearly universal in their deployment, which addresses the interoperability challenge. AUDD takes this a step further. 

Novatti’s AUDD envisions how the stablecoin could be the most interoperable system and dominate global payments in the future. AUDD will integrate a standardised on-and-off-ramp API using SEP-24. This feature lets you collect KYC information directly from the customer through a user interface opened by the user’s preferred wallet application. SEP-24 will let AUDD users transact with any participating service or platform using the stablecoin as the intermediary digital asset. You won’t be required to build a wallet integration with each exchange, which means transactions can be conducted faster.

Assume you no longer want to use a particular wallet application and prefer another SEP-24-enabled application instead. As an AUDD user, you can interact with the SEP-24 feature within the new wallet app without verifying again. This would eliminate the number of times that a user shares sensitive financial information and reduces the risk of their personal data being compromised.

Making transactions affordable via AUDD

Cross border transactions can be costly due to the number of fees involved, including currency exchange costs, regulatory costs, and intermediary charges. There are fees to pay, which can increase exponentially depending on the number of merchants involved. This is going to change with stablecoins like AUDD.

AUDD payments do not have to go through many processing merchants like banks. Transactions occur via blockchain, which is decentralised with no intermediaries. There is also no centralised authority like the government to impose statutory fees. You can send micro-payments using AUDD and incur very low fees.

Building transparent transactions through AUDD

Although blockchain and stablecoins offer a more convenient, faster, and cheaper medium of payment across borders, most merchants aren’t ready for the technology yet. 

One concern relates to the quality of reserves that back most stablecoins. As a merchant, you will only be comfortable holding a stablecoin if you are sure it will hold value in the longer term. Novatti solves this problem by backing AUDD with a real-world asset –  the Australian dollar on a 1:1 basis – which minimises the risk of AUDD depreciating in value. That way, it can hold value and be a safe currency for cross-border payments.

The second is the regulatory issue of stablecoins. Presently, stablecoins operate outside the regulatory parameter and are yet to be recognised as legal instruments. As a result, banks and financial merchants are unwilling to adopt them for transactions. AUDD is backed by a regulated fintech company, Novatti. This is an added layer of protection for users since AUDD circulation is reviewed and ascertained by external auditors. 

AUDD also deploys best practices to ensure transparency and security. The stablecoin is not pre-minted. It can only be minted and supplied after confirming an equivalent of the A$ in the custodial bank account.

Bringing cross border payment flexibility with AUDD

AUDD is designed to be a multi-chain payment solution. Currently available on Stellar, it will eventually roll out on other protocols like the XRP ledger and Ethereum. This agnostic approach allows AUDD to be more flexibly deployed as a payment medium.

The advantage of the agnostic design is that it makes AUDD available to anyone, thus promoting cross border payments on a broader scale. But it is also interesting to think how the stablecoin will disrupt protocol-native stablecoins and related blockchain payment mediums like CBDCs. For the former, deployment is limited to the issuing protocol meaning that its usage as a payment medium in cross-border relations faces challenges. For CBDCs, deployment is jurisdiction-specific and faces restrictions imposed by central banks. AUDD is devoid of both shortcomings, allowing the flexibility that cross-border payments need.

AUDD takes cross border payments to a new level

Blockchain and stablecoins offer a new way to conduct commerce across jurisdictions. The payment medium is faster, more flexible, transparent, and interoperable than existing systems. AUDD seeks to disrupt cross border payment by offering a highly flexible and secure payment network. Compatibility with the Stellar network enables AUDD to minimise fragmentation common in cross border payments. The future of stablecoin payments will become more mainstream as more development and a wider deployment of AUDD enables seamless cross border transactions.