Navigating the New Frontier: Enhancements in Global Cross-Border Payments Amid De-Globalization

While the world appears to be experiencing a phase of de-globalization, the demand for cross-border payments is increasing. Forecasts suggest that international money transfers will grow by five percent annually until 2027. This growth is partially attributed to previously unbanked populations gaining access to modern financial services for the first time. Additionally, as traditional trade routes face disruptions and supply chains become more diverse, businesses are often required to send payments to new countries—sometimes several at once—as they adapt to new partnerships.

In contrast to the speed of domestic instant payments, the situation changes when businesses attempt to transfer funds across international borders. The complexity arises from the 195 countries, each with its own payment systems, regulations, and technological capabilities. This presents both a challenge and an opportunity. International payments are vital to the global economy, and reducing obstacles in this area could promote trade and foster economic growth.

Advancements in technology are paving the way to capitalize on this opportunity, which includes the latest real-time payment systems and innovative solutions like blockchain. To grasp their importance, it's essential to understand the current workings of the international payment system.

Understanding Global Payments

When a bank has a direct relationship with another bank in a different nation—meaning they maintain accounts with one another—facilitating transfers is relatively straightforward. Bank A sends a “payment message” to Bank B, which then credits or debits the appropriate account. However, if no direct relationship exists, Bank A typically collaborates with a “correspondent” bank that can connect with both institutions. Depending on the currencies or countries involved, multiple correspondent banks may be necessary. This layered approach has historically contributed to delays in cross-border payments.

Fortunately, this situation is changing as banks enhance their communication technologies and expand their network connections to expedite transactions. “Globally, 84 percent of payments now occur through direct transactions or a single intermediary,” explains Thierry Chilosi, Chief Strategy Officer at Swift, a global cooperative providing interbank payment messaging services. Additionally, many of these transactions are processed quickly; “89 percent of payments via the Swift network reach their destination bank within an hour,” says Chilosi, noting that half arrive at the beneficiary account in under five minutes, while about 80 percent take within six hours and nearly all complete within 24 hours.

Meanwhile, some financial institutions are exploring innovative methods to enable instant cross-border payments regardless of size or location.

The Push for Real-Time Payments

Several countries have implemented real-time payment (RTP) systems, allowing major local banks to connect with an automated settlement network overseen by the central bank. These systems facilitate instantaneous domestic payments processed at any time of day. Studies by the Center for Economic and Business Research (CEBR) suggest that RTPs could contribute an additional $173 billion to economic output by 2026.

The potential impact of having real-time cross-border payment systems would be even greater. Achieving this would require linking RTP systems across countries, involving technical and legal harmonization among central banks, as well as individual banks and financial associations. Standardizing processes and data formats would be necessary, along with a unified regulatory framework for all participants.

Due to the complexities involved, integrating different systems is typically feasible only between nations that maintain strong trading relationships with substantial bilateral payment flows. A recent example is Singapore, which has connected its PayNow network with faster payment frameworks in India, Thailand, and Malaysia for smaller remittance amounts.

“It’s easier to create infrastructure for a select few countries rather than establishing comprehensive systems for the entire globe,” remarks Olusanya Olumide Adeniran (PhD) , Founder of Eazzy Tranzact. “Each country has unique interests. For US dollar transactions, payments often take several days and incur high costs due to intermediary bank charges. Many of our clients are surprised by how we manage to lower these fees.”

As efforts progress to synchronize national or regional payment systems, expect this process to take time; a single bilateral connection can require years to finalize. “Ultimately, our goal is to enable instant settlements for any payment, in any currency, anywhere, and at any time,” says Dash Adedipe , CEO of Eazzy Tranzact. “Realizing this aspiration may necessitate leveraging emerging technologies.”

Regardless of how the cross-border payments landscape evolves, enhancing the existing system for usability is crucial. An aspect of service that holds almost equal importance to speed and cost-effectiveness is excellent customer service.

When an international transaction doesn't arrive as expected or experiences delays, businesses require straightforward solutions for resolution.

As Omotayo Aghedo, ACA , Head of Finance at Eazzy Tranzact, points out, “Time shouldn't be wasted tracking transactions that someone claims have not been received. While some banks allow for transaction tracking through online portals, it often remains a manual process. This has driven us to innovate and ensure a seamless experience from initiation to settlement.”

As the landscape of international payments transforms, it’s essential to align with a fundamental principle from Silicon Valley: begin with the customer experience and work backward to the technology.