Cross-border payments: Landscape, challenges and innovations

Cross-border payments occur in two broad categories:

Wholesale cross-border payments

Wholesale cross-border payments are typically large-value transfers between banks, corporations, or other institutions (for trade finance, foreign exchange, debt and securities settlements, etc.).

Retail cross-border payments

Retail cross-border payments are smaller transfers between individuals or businesses (e.g., remittances, international payrolls, or e-commerce purchases).

Both types require moving money across distinct national payment systems and often multiple currencies. Because domestic systems are not directly linked, banks route payments via correspondent accounts: each bank maintains foreign currency accounts with a partner bank abroad. When one bank debits its correspondent account, the other credits the payee’s account, without any physical currency movement. Fintechs and money-transfer operators also piggyback on this network of accounts. If no direct account exists, an intermediary correspondent bank bridges the gap, passing messages and funds along a chain of accounts.

In practice, cross-border flows involve multiple intermediaries, currencies, and networks. A single payment may traverse several correspondent banks and messaging steps before being settled. This complexity increases processing time and fees.

For example, transferring between countries can take days and cost much more than a comparable domestic transfer. Major international messaging networks (e.g., traditional interbank telecoms) carry these instructions across borders. Central banks and payment infrastructures around the world have also built new linkages for real-time settlement: the EU’s TARGET Instant Payment Settlement (TIPS) and retail SEPA rails in Europe, or various domestic “fast-pay” systems in Asia and the Americas. Overall, global oversight (G20/FSB) emphasizes the enormous scale of cross-border payments and the need to bring them closer to domestic efficiency.

Despite recent improvements, cross-border payments still suffer from multiple frictions:

• High costs: Cross-border fees remain far higher than domestic ones. Banks and intermediaries typically charge multiple fees, including foreign exchange margins, and many corridors exceed the FSB’s 1% cost target. Nearly a quarter of payment corridors now see average sending costs above 3% of the transaction value, and retail remittances (e.g., a $200 transfer) still average 6% globally. The Bank of England notes that in some instances, a cross-border transfer can cost up to ten times more than a domestic payment. These expenses make international transactions prohibitively expensive for low-value users.
• Slow speeds: Many cross-border payments take several days to settle. Transfers can sit “inflight” through weekends and holidays until correspondent banks reconcile accounts. Even for fast rails, only about half of wholesale payments settle within one hour: Swift data shows 50.6% of such transactions clear end-to-end within an hour, and 92% within one business day. Retail speed is similarly constrained: under 2024 data, only ~46% of person-to-person payments reached recipients within one hour. (The G20 target is 75% within one hour and 98% within one day.) Fragmented time zones and limited operating hours exacerbate the delays, as most systems close overnight or on weekends.
• Limited transparency: It can be hard for senders to know the total cost or final amount a beneficiary will receive. Different fees and exchange rates may apply at each step, and many banks do not fully disclose these costs upfront. Global surveys find that only about 56% of payment services provide cost and speed information to end-users. Customers also lack visibility into payment status during transit. Improving transparency is a major regulatory goal, as noted by the FSB and G20 roadmap.
• Fragmentation of standards and networks: Cross-border payments run on a patchwork of systems and formats. Data fields, messaging standards, and legal requirements vary by country and by rail. For example, some legacy formats only support Latin characters or limited address fields, forcing manual translation of payment details for certain corridors. Different networks (SWIFT, ACH, CLS for FX, local instant-payment rails) are not natively interoperable. This fragmentation means banks often must perform extra processing, converting, and mapping data at each hop. The result is inefficiency and higher overhead for international transfers.
• Regulatory and compliance burdens: Cross-border payments must satisfy multiple countries’ anti-money laundering (AML) and combating the financing of terrorism (CFT), sanctions, and tax regulations. Each intermediary may apply checks, meaning the same payment gets screened repeatedly. The Bank of England observes that uneven international rules force “payments [to] be checked several times” by different systems, driving up compliance complexity. As global regulators have strengthened Know-Your-Customer (KYC) and AML standards, the costs associated with compliance have increased significantly. Banks require sophisticated screening and reporting systems to mitigate fraud; missing or inconsistent data can lead to rejections. This regulatory friction and the need to “pre-fund” correspondent accounts (trapping liquidity) further slow and complicate cross-border flows.
• Interoperability gaps: New technologies and networks struggle to connect without common architectures. For example, linking emerging faster-payment systems across borders requires standard interfaces and legal frameworks. The BIS Innovation Hub’s Project Mandala highlights how a modular design can prevent fragmentation by enabling interoperability among varied systems. In practice today, many regional or bilateral arrangements exist (e.g., U.K. Faster Payments linking some Eurozone rails), but a truly seamless global grid is still in development. Lack of interoperability forces banks into siloed corridors or slow fall-back options.

Each of these challenges is interrelated. Overall, cross-border payments remain slower, costlier, and less predictable than domestic ones. Addressing them requires improving infrastructure, standardization, and cooperation across jurisdictions.

Several industry and regulatory trends are now shaping the path forward:

New technologies and models are poised to transform the cross-border space:

• Central bank digital currencies (CBDCs) and DLT platforms: Several central banks are exploring wholesale and retail CBDCs to improve cross-border settlements. Notably, the BIS Innovation Hub’s Project mBridge (China, Hong Kong, Thailand, UAE, and Saudi Arabia) built a multi-CBDC blockchain platform that achieved a minimum-viable product by 2024. This DLT-based system enabled instant cross-border payments and FX transactions in CBDC tokens, targeting low cost and high availability. Similarly, Project Dunbar (Australia, Malaysia, Singapore, and South Africa) developed prototypes on distributed ledgers (Corda and Quorum) for a shared multi-currency settlement platform. These trials show how banks could transact directly in multiple digital currencies on a common infrastructure, potentially slashing settlement layers. The core idea is that tokenized central bank money on ledgers can bypass traditional correspondent chains, making payments faster, cheaper, and final. These experiments point to a future where authorized blockchain networks handle real-time cross-border payments.
• Blockchain and distributed ledger models: Beyond central-bank tokens, private-sector innovations (blockchain or DLT solutions) are also in play. For instance, global platforms built on permissioned blockchains can enable near-instant FX. The Dunbar project emphasized how smart contracts and CBDCs can form a programmable cross-border infrastructure. Other industry consortia (e.g., Project Jasper-Ubin in Canada/Singapore, Fnality in London/New York, etc.) are similarly prototyping ledger-based wholesale rails for cross-border cash or tokenized securities. While many of these remain experimental, they exemplify the push towards decentralized architectures that can settle cross-border payments without the multiple intermediaries of today.
• API standardization and open connectivity: Financial institutions and payment systems use open APIs to exchange payment data more frequently. Initiatives are underway to harmonize API design so that cross-border requests and confirmations flow seamlessly. The BIS (CPMI) has convened an API panel (APEX) to develop best practices. APIs can improve efficiency in payment initiation, status tracking, and reconciliation. For example, under the Project Nexus blueprint, the BIS published ISO 20022 message and API specifications to ensure all participants (banks, schemes, etc.) can plug into the network. Similarly, standards bodies promote RESTful APIs for FX instructions, account lookups, and batch transfers that align across borders. Standardized APIs mean a corporate treasury system could “dial into” foreign payment gateways directly, reducing manual file exchanges. As more countries adopt ISO 20022, an increasing share of cross-border traffic will use API interfaces that adhere to global data standards, further smoothing connectivity.
• Multi-currency settlement platforms: A related innovation is the concept of a shared settlement platform for multiple currencies. Using a single infrastructure for multiple currencies allows for settling transactions without repeated conversions. The BIS projects mentioned above are examples: mBridge and Dunbar effectively acted as multi-currency platforms using DLT. In the regional context, blockchain-linked local currency platforms are emerging (e.g., Project Inthanon-LionRock links HKMA and the Bank of Thailand, evolving into mBridge). Outside blockchain, some proposals call for FX nets using real-time tokenized cash reserves. The hope is to reduce foreign exchange legs and to allow payments to be “native” on a common platform. 

These innovations carry promise but face hurdles (governance, interoperability, legal frameworks). Still, they demonstrate how cross-border payments could evolve beyond the old correspondent model. Indeed, as BIS notes, designing a shared multi-CBDC or multi-currency infrastructure can make payments “faster, cheaper, and safer” by removing intermediaries.

Europe—SEPA and beyond

Europe’s Single Euro Payments Area (SEPA) is often cited as a success story in cross-border integration. Within the 38-country SEPA zone (covering EU members and a few non-EU nations), euro payments are treated like domestic transfers. Through harmonized standards (uniform IBANs, common credit transfer, and direct-debit schemes, and the Euro as a single currency), SEPA has eliminated the traditional distinction between national and cross-border euro payments. This has yielded very low fees and same-day settlement for pan-European transfers, at near-domestic speed. The recent launch of SEPA Instant Credit Transfers (via the TIPS settlement system) extends to 24/7 real-time settlement across Europe. Europe shows that a shared currency and regulations can reduce cross-border friction. Despite challenges similar to non-Euro currencies or the post-Brexit UK, efforts such as linking the UK’s Faster Payments system to EU rails are in progress. European banks are also leading interlinking projects. 

Asia-Pacific (APAC)

APAC is highly diverse, with several currencies and payment systems. A common theme is rapid domestic innovation with growing cross-border links. For example, several Southeast Asian countries have launched instant-payment schemes (e.g., Singapore’s PayNow, Thailand’s PromptPay, Malaysia’s DuitNow). In late 2023, Thailand and Singapore became the first to directly connect their fast-pay networks: a Thai user can send baht or SGD instantly to a Singaporean account (and vice versa) using a mobile number. This landmark linkage shows Asia’s potential, providing a blueprint for extending real-time rails across borders. Other APAC efforts include Singapore’s Project Ubin, which led to the Dunbar prototype, and Hong Kong-China links (e-CNY and Hong Kong’s CIPS already handle massive RMB flows). China’s cross-border interbank payment system (CIPS) operates globally for RMB clearing, and SWIFT has an MOU to interconnect with CIPS. Moreover, Project Nexus (mentioned earlier) is explicitly expanding across ASEAN and beyond – Indonesia, the Philippines, and others have worked on connecting their instant-pay systems to the Nexus hub.

APAC is at the forefront of fast payments and CBDC pilots. The region’s large corridors (CNY–USD, USD–JPY, CNY–EUR) remain heavily correspondent-based, but local rails and policies are beginning to shape alternative paths. For instance, India’s UPI (domestic RTP) is exploring cross-border use with partners like the UAE; Australia’s new instant system (RBA’s NPP “FedNow”) may link to others. While fragmentation is still challenging (different countries’ rules, currencies, and rails), APAC shows leadership in deploying new real-time infrastructure and experimenting with cross-border interlinkage.

Other Corridors

Beyond Europe and APAC, notable regional initiatives and corridors include:

Africa

The African Union and Afreximbank have launched the Pan-African Payment and Settlement System (PAPSS) to enable local-currency RTGS settlement across the continent. PAPSS (launched January 2022) connects African central banks and payment systems so traders can pay in their respective local currencies. This ambitious scheme is meant to complement the African Continental Free Trade Area. In practice, it is still being rolled out country by country, but it offers a unified infrastructure in a region of otherwise fragmented FX arrangements. By facilitating intra-African transfers without multiple intermediaries, PAPSS aims to shorten settlement times and reduce costs on important new corridors (e.g., Nigeria–Kenya, Ghana– South Africa, etc.).

Americas

In North America, the U.S., Canadian, and Mexican banks typically use large-value systems (Fedwire, CHIPS, Lynx, SWIFT) for cross-border flows. There is no single regional scheme similar to SEPA, but improvements continue. For example, the Federal Reserve has modernized Fedwire and established the FedNow instant system for domestic use, and Canada operates Lynx 24/7. Industry work is ongoing, linking RTP channels and improving remittance rails to Latin America. In Latin America and the Caribbean, cross-border payments often rely on U.S. dollar chains or local clearing houses (e.g., Banco do Brazil’s PIX linking with Mercosur partners). Some countries (Brazil, Mexico, Colombia) are discussing RTP linkages, but progress varies. Overall, the Americas reflect a mixture of legacy high-value corridors and nascent fintech solutions, and continue to focus on remittance corridors (U.S.–Mexico, U.S.–Latin America) for speed and cost reduction.

Other notable links

Bilateral initiatives sometimes create “fast lanes” in key corridors. For instance, Singapore is an observer in Project Nexus and has frameworks linking PAYNOW to other countries’ systems. The U.K., as a major financial hub, is exploring connections between its Faster Payments and European rails. The leading global banks have built payment utilities (e.g., Swift gpi) to improve execution across any corridor. Each corridor (e.g., USD–EUR, USD–CNY, EUR–GBP) has its mix of rails and liquidity patterns, and the path to innovation may differ by region and currency. Local regulations and bilateral agreements influence the speed at which new services are introduced.

The journey toward truly frictionless cross-border payments will require continued collaboration and innovation. The technical building blocks (common data standards, linked rails, interoperable networks) and regulatory cooperation we have seen emerging – from ISO 20022 to global AML guidelines – form the blueprint for progress. Central banks’ CBDC pilots and fintech platforms show how direct ledger-based settlement can greatly speed up cross-border flows, though adoption requires new legal and governance frameworks. At the same time, improvements to existing infrastructure (e.g., Swift enhancements, global API networks, expanded operating hours) can yield gains in the near term. 

Looking ahead, the ambition remains to meet the G20 targets: for example, having 75% of payments credited within one hour and effective cost transparency by 2027. Achieving these goals means reducing the reliance on multiple correspondents, removing overnight delays, and giving customers clear pricing. Continued efforts similar to the FSB’s cross-border payments forum, the BIS-CPMI market practice groups, and public-private task forces will drive alignment of standards and regulations. Ultimately, the end-state is more inclusive and efficient global payments—a landscape where sending money across borders is as easy and affordable as sending it across town. 

About the authors

Trevor LaFleche

Head of Product Marketing

Trevor LaFleche is the Head of Product Marketing at ACI Worldwide. In this role, he is responsible for the global go-to-market strategy and positioning of ACI Connetic, the company’s unified platform bringing together account-to-account and card-based payments underpinned by advanced financial crime and data analytics.