Optimal payment scheme selection in global supply chains

Abstract

Cross-border payments are one of the main terms in an international trade contract, and blockchain technology started to challenge the traditional intermediary channels for making such payments, e. g. the SWIFT network. The paper considers the selection of cross-border payment scheme, where the seller is considering whether it would be more beneficial for him/her to use blockchain technology or SWIFT to complete the transaction. The seller’s profit function, which includes late transaction fees, exchange rate/cryptocurrency fluctuations during the payment interval, and the compensation in case of an incomplete transaction, is analyzed for both payment schemes with the selling price and the type of payment scheme being the decisions made by the seller. For di erent parameter sets of sales quantity, late transaction fees, transaction costs, and incomplete transaction compensation, as well as di erent exchange rate/cryptocurrency fluctuation distributions, optimal decisions are demonstrated to provide insights to sellers on which payment scheme to favour in di erent currency exchanges and other contract terms.