A host of improvements to cross-border payments promise to enrich the global payments landscape. But implementing change in this complex industry is not easy.
In today’s interconnected and interconnected world, a critical turning point has been reached regarding cross-border payments. Businesses and consumers – increasingly frustrated by outdated, inadequate and inefficient international payment processes – are demanding fast, transparent and low-cost services from their providers. The industry’s need to provide services is more urgent than ever.
Initiatives are advancing at a rapid pace to help facilitate the transition to seamless, 24/7 global payments. The goal is to replicate the same customer experience that has become more accessible in the local payments space. But change of this magnitude comes with challenges, and a byproduct of the race to deliver real-time cross-border payments is a landscape mired in disparate concepts and services, with fragmentation exacerbated by the unique sets of payments rules and systems adopted by individual countries.
Internationally, initiatives such as the G20 Roadmap to Boost Cross-Border Payments, which sets quantitative targets to help make cross-border payments cheaper, faster, more transparent and accessible by 2027, have spurred industry-wide efforts to promote greater standardization, legal and regulatory harmonization and interoperability of payment systems.1. It is certain that as the industry approaches the consolidation of cross-border payments, there must be a focus not just on enablement, but on standardization to directly address fragmentation, while ensuring that security and customer satisfaction are maximized.
The challenging world of cross-border payments
Moving money internationally is a complex undertaking, involving multiple parties, moving between time zones and adhering to each jurisdiction’s regulatory requirements. This makes the process slow and complicated, with high costs for both sender and recipient, and a lack of transparency regarding payment status and associated fees. So it’s no surprise that global payments have become a headache for customers – and even their banking partners. Financial institutions (FIs) are well aware of the impact of legacy processes on customer service, and the very real need to implement enhanced processes to bring global payments in line – quite literally – with the demands of the 21st century.street century.
As banks resolve to offer cutting-edge cross-border payments, they face the challenges of legacy platforms, a lack of real-time infrastructure, and innovation hampered by regulatory constraints. Against this backdrop, banks also have to deal with an increasingly competitive landscape. Innovative, nimble non-bank players with a global presence have thrown their hats into the cross-border payments loop to offer unconventional approaches to solving the problem of high costs and uncertainty. By creating alternative payment networks, fintech provides a user experience that many banks cannot currently match when it comes to speed, transparency and cost.
As financial institutions seek to overcome these hurdles and provide customers with flexible and instant cross-border payments, alignment with the pillars of the G20 Roadmap is essential to support a unified global payments ecosystem and enable banks to effectively advance towards the ultimate cross-border goal. Designed to promote faster acceleration of global instant payments, it is invaluable in helping the banking industry effectively chart the course towards a cohesive and consistent future.
Merging old and new: Combine old, low-value bars with instant scanning
One of the key approaches adopted by the industry is to enhance existing infrastructure, with a focus on improving speed and visibility. Banks are readily implementing new industry initiatives – such as those offered by Swift – and other new technologies and processes to meet the needs of their global customers.
For example, by standardizing correspondent bank payment reporting under uniform rules, Swift gpi provides real-time, comprehensive tracking and transparency of cross-border payments. This subsequently contributed to reducing the overall overall processing time, thus providing better customer service. Building on the success of Swift gpi, Swift Go unifies correspondent banking relationships under unified service level agreements. This enables similar capabilities to the low-value payment space – facilitating more efficient delivery channels like ACH and instant payments, rather than just money transfers.
Complementing these developments, financial institutions are embracing interoperability, alternative payment rails, and smart foreign exchange services to reduce costs and enhance service delivery. BNY’s Swift to ACH initiative allows financial institutions to initiate cross-border payments via ISO 20022 pacs.008 messages and deliver them via US domestic rail ACH – a lower-cost alternative to traditional US dollar bank transfers. Recipients receive the full amount by the next day, while creators benefit from lower transaction costs and the ability to provide a predictable customer experience. The service is part of a suite of low-value payment resources that includes offering foreign currency conversions into a wide range of local currencies for delivery via low-cost payment paths – helping organizations reduce costs and remain competitive with fintech offerings. BNY’s extensive correspondent banking network, coupled with strategic collaborations with fintech companies and other service providers, enables us to expand our offerings to provide a broader range of services beyond traditional financial services.
The combination of industry and proprietary initiatives helps banks expand their global payments value proposition and deliver the quality of service customers seek – without requiring costly investments in new infrastructure. Banks are becoming truly competitive in the cross-border payments space today.
Standing on solid ground: the foundations of consistency
The next step is to enable interoperability and connectivity between different payment systems and platforms by aligning compliance and regulatory requirements across jurisdictions. This requires governments, network operators, banks, and industry bodies to move in the same direction, adopt common standards, and create standardized processes for managing exceptions. It is encouraging that progress is already underway in many areas.
This issue is being addressed in Europe through EPC’s Instant Credit Transfer (OCT Inst) system, which enables payment service providers (PSPs) to leverage existing Single European Payments Area (SEPA) payment paths – including procedures, features and standards – to facilitate cross-border payments that have one euro leg inside and one leg outside the SEPA. (SEPA). For example, in November 2024, EBA CLEARING was launched with the OCT Inst service for RT1, a pan-European real-time payment processing system for instant credit transfers.2.
A similar approach is being adopted in other markets to enable cross-border interoperability using existing local railways. One notable example is the Bank of New York’s partnership with the Commonwealth Bank of Australia (CBA). Through our correspondent banking relationship, BNY clients can now send real-time payments to Australia 24/7, 365 days a year. This has been made possible thanks to a new feature within the New Payments Platform (NPP), Australia’s real-time payments system. The International Payments Service (IPS) allows the Australian dollar component of incoming cross-border payments to be processed instantly. Previously, international transactions could only be settled via traditional money transfers. Now, CBA can clear and settle payments on behalf of BNY 24/7, with recipients able to access funds in less than 60 seconds – regardless of the sender’s location. Through a network of over 2,000 correspondent banks worldwide, BNY is replicating this process with partner banks in other countries as other jurisdictions adopt an international framework within their instant payment schemes.
Elsewhere, the United States-Mexico-Canada Agreement (USMCA) was created to promote cross-border payments between the three countries. As part of the strategy, input from fintech companies is encouraged to share skill sets and develop improved processes.
Fintech and emerging technologies certainly have a role to play in shaping global payments. Blockchain-based services for continuous settlement on a single ledger are emerging as alternatives to correspondent banking. Many markets are increasingly choosing digital wallets as their preferred service option.
Combined, these infrastructure developments may allow global payments to be made at any time, without being restricted by business hours, time zones or business days. This may lead to greater cash flow visibility, more efficient supplier management, and improved liquidity control for businesses. total, Real-time payments Increased flexibility in liquidity management.
Solve the payments puzzle together
As the industry comes together to create a more standardized environment, there will inevitably continue to be different schemes in different markets, each with their own unique models, rules and SLAs. Banks must take into account their target markets and integrate with relevant initiatives to effectively meet customers’ international payment needs.
Banks must then provide an integrated global payments hub that allows customers to transfer money quickly, anywhere, anytime with ease. In fact, as complexity and fragmentation become more prevalent, it is the ability to deliver a simple and effective experience that will provide the most value.
At the same time, the industry must work to integrate shared values and infrastructure into initiatives such as “single-leg” settlement, digital wallets and correspondent banking models, to enable the global payments ecosystem as a whole to operate seamlessly. In this regard, the G20 Roadmap should be considered as a North Star, guiding the industry towards harmonization by following its principles. Doing so will help instill a common infrastructure framework, centered around uniform rules and principles around 24/7 availability, transparency, finality, fraud prevention, and a common standard for messaging.
While fragmentation remains within the cross-border infrastructure, building solid foundations and strengthening cooperation will support future solidarity, manage markets holistically towards a truly global solution, and chart the road map for future connectivity.
Joan Strobel CourtGeneral Manager, Head of Treasury Services for International Payments Products | Bank of New York
About the author
Joan Strobel Court He is Head of International Payments Products at BNY, where he directs the strategy, development and implementation of global payments solutions. With over 30 years of experience, Joan has held senior roles at Wells Fargo – leading segment solutions, technical sales and network management – and served as Head of Payments Products at Citizens Bank, with previous transactional banking roles at Deutsche Bank, ABN AMRO and Citibank. As an industry authority, she has sat on SWIFT councils, chaired CHIPS and BAFT committees, spoken at SIBOS and published articles on cross-border payments.
