Blockchain for Cross-border Payments and Financial Inclusion: The Case of Stellar Network

Abstract

This paper examines the potential of blockchain technology in transforming cross-border payments, with a specific focus on African countries. We first explain Stellar's key features, including its consensus protocol and payment mechanism, and underscore its advantages over conventional cross-border payment systems. We further explore the challenges and opportunities associated with the adoption of blockchain-based solutions, with a specific emphasis on stablecoins, in promoting financial inclusion. We highlight the significance of social and cultural factors in shaping the adoption of blockchain solutions and the need for contextualized solutions tailored to specific regions and target markets. Three cases of Africa-focused blockchain startups were given to provide valuable insights into the practical blockchain applications in addressing localized cross-border payment challenges. We emphasize that overcoming technical, regulatory, and social challenges is crucial for blockchain adoption in cross-border payments. The collaborative efforts among diverse stakeholders are essential to driving the growth of blockchain-based solutions.

Keywords: Blockchain, cross-border payment, stablecoin, financial inclusion, Africa

JEL Classification: G23, M13, 055