Top Challenges in Cross-Border Payments and How to Solve Them

Cross-border payments – financial transactions where the sender and recipient are in different countries – form the backbone of global trade, investment and remittances. They handle enormous value: one estimate puts the total cross-border payment flows at over $150 trillion in 2017, rising to roughly $250 trillion by 2027. 

Yet despite their size, international transfers have long lagged domestic payments in efficiency. Global oversight bodies like the Financial Stability Board (FSB) note that cross-border payments have faced “high costs, low speed, limited access, and insufficient transparency”. 

In practice, a single international transfer may traverse multiple correspondent banks and messaging networks, taking days and accruing high fees and hidden markups along the way. These frictions increase costs for businesses and consumers alike.

Improving cross-border transfers is now a top priority for regulators and industry (e.g. the G20’s Cross-Border Payments Roadmap). Businesses, banks and fintech firms are racing to solve the key pain points – cost, speed, transparency and compliance – using new technologies and networks. 

Innovations like SWIFT’s GPI, blockchain rails and digital currencies (stablecoins, CBDCs) are redefining how money moves globally. 

In this article we explore the top challenges plaguing cross-border payments today, and explain the solutions being deployed: from real-time payment networks and smart remittance platforms to blockchain-ledger systems and central bank digital currencies (CBDCs). 

We focus on the U.S. market context as well, noting how American banks, corporations and regulators (e.g. the 2025 GENIUS Act) are addressing these issues.

High Costs and Hidden Fees

One of the biggest challenges in cross-border payments is high cost. Unlike domestic transfers, international payments typically incur multiple fees: correspondent-banking charges, foreign exchange (FX) markups, processing fees, and sometimes taxes. 

Legacy bank processes are opaque: each bank in the chain may apply its own markup or “pass-through” charges. An industry survey found that many CFOs say FX spreads and hidden fees are a major pain point. 

This erodes the value of payments: for example, a $100 transfer could easily cost $5 or more in fees (5% effective cost), especially for smaller payments.

How to solve it: Cost reductions come from greater transparency and new payment rails. Fintech payment providers now emphasize all-in pricing and mid-market FX rates, eliminating hidden markups. 

They aggregate volume globally to negotiate better bank rates, or even bypass some correspondent banks altogether. For example, blockchain-based stablecoin networks let businesses convert fiat to a USD-pegged token (like USDC) and transfer value directly, skipping multiple bank layers. 

This can cut fees substantially: one study found blockchain remittances could yield “3,300%” more cost savings by 2030 relative to legacy systems. Larger corporations hedge FX risk with forward contracts or multi-currency netting. 

Some global firms (or their banks) offer virtual multi-currency accounts and pooling, so funds can be debited in one currency and credited in another with minimal FX churn. In short, transparent platforms (with clear FX rate disclosures) and alternative rails (stablecoins or blockchain links) help eliminate hidden costs.

• Compare FX offerings: Use providers that show real exchange rates and fees up front.
  
• Multi-currency accounts: Hold balances in key currencies to minimize conversion steps.
  
• Hedge and netting: Utilize FX forwards or netting platforms to manage volatility and reduce transaction costs.
  
• New rails (blockchain): Send value via digital tokens (e.g. stablecoins) or specialized networks to bypass fee-heavy banks.

Overall, adopting fintech solutions and crypto rails can drive down the total cost of sending money abroad, often significantly undercutting traditional banks.

Slow Settlement and Legacy Infrastructure

A second major challenge is speed and settlement time. Traditional cross-border transfers often take days to complete. Each intermediary bank has cut-off times and batch processing, so a payment might sit in transit overnight or over weekends. 

In practice, it can take 2–5 business days for a payment to clear from the U.S. to a distant country. These delays disrupt business cash flow and leave funds in limbo.

How to solve it: The industry is moving toward real-time and faster-payment rails. SWIFT’s Global Payments Innovation (GPI) is one such solution: today about 60% of GPI-enabled payments are credited to the beneficiary within 30 minutes, and almost all (nearly 100%) within 24 hours. 

GPI also stamps each transaction with a tracking ID and timestamp so banks can monitor progress. Many banks in the U.S. and abroad now offer GPI, greatly speeding up correspondent flows.

Other innovations accelerate settlement further. Local real-time systems (e.g. the U.S. FedNow Service or RTP, and international fast rails like Europe’s SEPA Instant or Asia’s Pix/RTP) are connecting cross-border. 

Project Nexus, led by the Bank for International Settlements (BIS), aims to link multiple national real-time networks into a global mesh. In pilot programs, Nexus is demonstrating near-instant cross-border rails by bridging domestic systems. 

Meanwhile, blockchain and digital tokens allow truly instant 24/7 settlement. Payments made on a blockchain settle in seconds or minutes regardless of banking hours, because transactions are validated by consensus rather than sequential bank processing. 

For example, pilot projects like the BIS’s mBridge platform used multiple CBDCs on a shared DLT ledger to achieve immediate, final settlement across borders.

In summary, solutions to improve speed include:

• SWIFT GPI adoption: Ensures sub-day processing with end-to-end tracking.
  
• Real-time payment networks: Leverage instant rails (FedNow, RTP, TIPS, etc.) and link them via initiatives like BIS Nexus.
  
• Blockchain/digital assets: Use stablecoins or CBDC-based platforms for near-instant 24/7 settlement.
  
• Payment pools: Corporations can aggregate flows regionally and net offsets to reduce total transfers.

These innovations are steadily closing the gap between domestic and international speed – transforming multi-day transfers into near-real-time payments.

Lack of Transparency and Payment Tracking

A related problem is poor transparency. Businesses often cannot easily track where an international payment is en route, or why delays and fee deductions occur. 

Traditional bank transfers offer limited status updates, so payers and recipients remain unsure of payment progress. One treasury manager lamented that FX markups and “delays in confirmations” were major frustrations.

How to solve it: Modern systems build tracking into the process. SWIFT GPI, for instance, provides an end-to-end tracking tracker for each payment. 

Corporates can log into bank portals to see timestamped logs: when the payment left each bank, how much was deducted at each stage, and when it arrived. Fintech remittance platforms similarly offer dashboards that show live payment status.

Blockchain also inherently improves transparency. Every transaction on a public ledger can be viewed (albeit anonymously), giving a clear audit trail. Even private chains can provide viewing permission to auditors. 

This “single source of truth” lets senders and receivers verify that funds moved on schedule, and aids in quick reconciliation.

Key steps to increase transparency:

• Real-time tracking tools: Use SWIFT GPI and bank dashboard solutions for payment status visibility.
  
• Blockchain ledgers: Move payments onto shared digital ledgers that record each transaction immutably.
  
• Detailed messaging: Implement richer data standards (ISO 20022) so that payments carry invoice details, enhancing traceability (see below).
  
• Automated notifications: Set up alerts at milestones (e.g., sent, in transit, received) to keep all parties informed.

By adopting tracking and transparency features, firms can ensure they always know where their cross-border funds are, reducing errors and disputes.

Regulatory Complexity and Compliance

Cross-border payments must navigate a thicket of regulations that differ by country. Anti-money-laundering (AML) and “know-your-customer” (KYC) requirements are stricter for international transfers. 

Sanctions lists and screening rules vary globally, and regulators scrutinize any cross-border flow for illicit finance. These compliance demands add cost and friction: a money services business must vet every cross-border transfer against hundreds of watchlists and rules. 

For instance, banks in the U.S. and EU now must implement the FATF “Travel Rule” for crypto assets, complicating even blockchain payments.

How to solve it: Firms are investing heavily in RegTech and automation. AI-driven tools can scan a payment’s data in real time, automatically flagging sanctioned counterparties or unusual patterns. 

Many banks use automated screening engines that compare transaction details against sanction lists and credit hidden risks much faster than manual checks. Regulatory sandboxes and pilot programs (e.g. Project Agorá) also help companies test new payment methods under regulatory guidance. 

Importantly, industry-wide standards are emerging: the G20’s roadmap encourages common message formats and data fields (like ISO 20022) to make compliance data consistent.

Moreover, recent laws are creating clearer frameworks. For example, the U.S. GENIUS Act (2025) formalized rules for USD-backed stablecoins, requiring issuers to obey AML/KYC and maintain reserves. 

This brings clarity to companies using stablecoins for payments – they must now register and follow banking-grade compliance.

To manage regulatory challenges:

• RegTech solutions: Deploy automated screening, transaction monitoring and machine-learning compliance tools.
  
• Data standards: Adopt enriched messaging (ISO 20022) which carries structured compliance data (IBAN, purpose, location) to meet regulators’ needs.
  
• Collaboration: Work with licensed global partners who have established AML/KYC programs, sharing information securely (e.g. open APIs for client data).
  
• Proactive policy engagement: Keep up with initiatives like G20/FATF guidelines, and use regulatory sandboxes to pilot new solutions under oversight.

By integrating compliance controls and transparency from the start, cross-border payments can move faster and with fewer errors – meeting regulators’ goals and building trust.

Payment Infrastructure and Access Gaps

Cross-border flows depend on diverse payment infrastructures, and sometimes funds simply cannot be sent directly. Many smaller banks or payment providers lack direct correspondent relationships in some countries, forcing multi-hop routes that add time and cost. 

This “correspondent banking retreat” means certain regions have limited access to global finance. For example, if a U.S. bank has no direct account with a Nepali bank, it may route USD→SGD→NPR through several banks – each adding fees. 

Similarly, not all banks have adopted SWIFT GPI, and legacy telecom networks (like SWIFT MT messages) are slowly being phased out.

How to solve it: New networks and partnerships are bridging these gaps. Fintech platforms like Ripple, Thunes and Convera connect hundreds of local payment methods and banks, allowing senders to reach more regions without each bank having a direct relationship. 

They do so by building their own global payment “rails” or by leveraging cryptocurrency corridors on the backend.

On the public side, multi-currency CBDC networks are under development. The BIS mBridge project – a collaboration of several central banks – built a prototype multi-CBDC ledger that can route payments across jurisdictions instantly. 

It tackled exactly these access issues: by linking the central bank accounts of multiple currencies on one platform, any participating bank could send money on the common ledger, making cross-border payments “immediate, cheap and universally accessible”. 

Even though mBridge is still an experiment, it shows how connecting infrastructures can open up previously siloed corridors.

In practice, companies solve access issues by:

• Using global PSPs: Work with specialized payment service providers that cover more countries and currencies.
  
• Leveraging digital currencies: Some rely on on-chain transfers (e.g. stablecoins or tokenized FX) to route payments through crypto networks where correspondent lines are missing.
  
• Connecting real-time systems: Participate in initiatives (like Project Nexus) that link domestic real-time payment platforms across borders.
  
• Developing local partnerships: Fintechs often partner with local banks or e-money wallets abroad to deliver cross-border pay-ins and pay-outs seamlessly.

These approaches expand the reach of cross-border payments and reduce reliance on traditional correspondent chains, gradually closing the access gap for underserved corridors.

FX Volatility and Currency Risk

Cross-border payments inherently involve currency exchange, exposing senders and recipients to FX risk. Volatile exchange rates (especially in emerging markets) can significantly change the value of payments. 

For example, if payment settlement is delayed by days, a 10% swing in an exotic currency could wipe out any profit margin. Unpredictable FX is a top concern for treasurers making frequent international payouts.

How to solve it: Companies use hedging products and pricing strategies. Forward contracts and currency options allow locking in rates for future payments, eliminating some uncertainty. Another approach is to use stable-value instruments as an intermediary: stablecoins can act as a bridge currency. 

By converting to a dollar-pegged token on-chain, a payer avoids short-term FX fluctuations; the recipient later redeems the stablecoin into local currency. This effectively defers FX conversion to a convenient time. 

Blockchain networks facilitate this: a recent report noted that stablecoins (with ~$230 billion market cap) are increasingly adopted for cross-border flows in volatile economies. 

Indeed, in countries with high inflation (like Turkey, Nigeria or Argentina), consumers and businesses are turning to digital dollars for remittances and savings, underscoring stablecoins’ role as a hedge.

In addition:

• Multi-currency invoicing: Suppliers can invoice in major stable currencies (USD, EUR, etc.) or even allow payment in multiple currencies, passing FX timing risk to parties better positioned.
  
• AI-assisted FX: Some providers are beginning to use AI to time or split FX transactions optimally, reducing cost or execution risk (for example, breaking a large payment into smaller tranches based on rate fluctuations).
  
• CBDC evolution: In the future, international CBDC systems may allow atomic currency exchange. Project mBridge, for instance, demonstrated simultaneous FX settlement (“payment-versus-payment”) on its multi-CBDC ledger, eliminating one side of settlement risk.

By combining financial hedges with digital-asset rails (stablecoins or CBDCs), businesses can make cross-border transfers without suffering unpredictable currency losses.

Interoperability and Data Standards

The cross-border ecosystem encompasses many different networks and standards. Banks in the U.S., Europe, and Asia have their own messaging formats, and not all systems “speak” each other easily. 

For years, SWIFT messaging (MT format) dominated, but now the industry is migrating to ISO 20022, a richer data standard. Adopting ISO 20022 is key: it provides a universal language for payments, with detailed, structured data fields. This improves interoperability and compliance by ensuring every payment carries consistent information worldwide.

However, the coexistence of old and new standards adds complexity during the transition. Banks must upgrade systems, and many fintechs need to support multiple formats. 

Similarly, there are diverse blockchains and payment networks in parallel (e.g. various private DLTs, public chains, card networks), and not all are easily bridged. This leads to fragmentation: for instance, a payment initiated on one blockchain or payment API may require a manual bridge or exchange to another network.

How to solve it: The industry is consolidating around common protocols. SWIFT’s gpi and ISO 20022 adoption (now in progress for Fedwire and other major systems) ensure that banks and corporates use harmonized message formats. 

Efforts like SWIFT’s CBPR+ convert MT messages to ISO 20022 with minimal disruption. Meanwhile, some companies offer multi-network gateways (so-called “multi-rail” engines) that can route a payment via ACH, card, PIX, or blockchain as needed, hiding the complexity. 

Regulators and standards bodies also collaborate internationally to unify rules (e.g. FATF guidance, U.S. FinCEN rules on crypto transfers).

A key step is the migration to ISO 20022. For example, in July 2025 the Fedwire Funds Service will fully implement ISO 20022. This means U.S. banks will send richer payment data to each other, aligned with global norms. 

In effect, ISO 20022 acts as a universal “contract” between payment systems worldwide, reducing errors and making reconciliation faster.

• Single standards: Adopt ISO 20022 and newer messaging in any system upgrade, and require correspondent banks to do the same (drives interoperability).
  
• API integration: Use modern APIs or platform middleware that can connect to multiple networks (e.g. a payment that tries ACH, and if it fails, falls back to card rails or stablecoin rails).
  
• Partnership networks: Join industry consortia (like SWIFT community, or global sandbox programs) so that everyone aligns on the same formats and rules.
  

These measures help ensure that regardless of which payment ‘rail’ is used, the information is compatible, and systems can interoperate smoothly. As one report notes, transitioning to ISO 20022 is a “strategic imperative” to thrive in a unified global payments landscape.

Security and Fraud Prevention

Finally, security and fraud are critical challenges. Cross-border payments are attractive targets for fraudsters because there are more intermediaries and sometimes weaker controls abroad. 

Old cases (like SWIFT hacking incidents) highlight how vulnerabilities can be exploited. In response, banks and regulators enforce strict controls. However, overly onerous checks can slow payments, so balancing security with speed is delicate.

How to solve it: Providers are embedding robust security and analytics. For instance, many platforms now use AI and machine learning to detect anomalies in real time. 

These tools analyze every transaction for unusual patterns (rapid repeat transfers, mismatched location/IP, unusual recipient chains) and flag high-risk transactions immediately. Artificial intelligence can reduce transaction failures and cut false positives, making fraud screening both more effective and faster.

Moreover, tokenization and cryptography play a role. Blockchain’s immutable ledger prevents tampering: once a cross-border transfer is confirmed on-chain, it cannot be reversed without consensus, reducing fraud risk. 

Payment data itself is increasingly encrypted end-to-end, protecting sensitive payer/payee details. Companies also share threat intelligence: for example, SWIFT’s Customer Security Programme (CSP) obligates member banks to perform cyber-hygiene checks.

To bolster security:

• Advanced screening: Use AI-driven fraud filters and global watchlists to catch scams and money laundering.
  
• Multi-factor authentication: Ensure users initiating cross-border transfers have strong identity verification (biometrics, multi-Factor auth, hardware tokens).
  
• Encryption and tokens: Adopt secure messaging (e.g. encrypted SWIFT messages) and tokenization for payments, so account details are never exposed.
  
• Industry standards: Comply with frameworks like PCI-DSS (for card rails) and exchange threat data with other institutions.
  

By combining technical safeguards (encryption, blockchain tracing) with smarter controls (AI-based screening), businesses can significantly reduce fraud losses while keeping international flows fluid.

Leveraging Emerging Technologies

The challenges above are being tackled by several new technologies reshaping cross-border payments:

• Blockchain and Stablecoins: Using distributed ledgers and stablecoins can drastically cut cost and time. For instance, blockchain payments eliminate intermediaries, allowing near-instant transfers.
  
  Stablecoins (crypto tokens pegged to fiat like USD) enable 24/7 settlement at much lower fees. Many businesses are piloting this: companies like SpaceX already accept stablecoins for payments in volatile regions.
  
  A transparent blockchain ledger also improves auditability and fraud detection. Drawbacks include price volatility of some digital assets (though stablecoins are designed to avoid this) and evolving regulation.
  
  Notably, the U.S. has passed the GENIUS Act to license and regulate stablecoin issuance, requiring issuers to hold reserves and comply with AML/KYC rules.
  
  In short, blockchain-based solutions offer huge speed and cost advantages, especially when paired with proper governance and compliance.
  
• Central Bank Digital Currencies (CBDCs): Many central banks are exploring CBDCs as digital cash. A CBDC is simply the digital form of a country’s fiat currency, issued by the central bank.
  
  The IMF notes that CBDCs could become a “safe, liquid asset” and provide a “clean slate on which cross-border processes can be redesigned”.
  
  Pilot projects like BIS mBridge (described above) have demonstrated multi-CBDC ledgers that enable instant, low-cost cross-border payments.
  
  CBDCs could allow direct settlement without correspondent banks – for example, a U.S. CBDC (digital dollar) sent to a foreign CBDC (digital euro) in one atomic step, reducing counterparty and settlement risk.
  
  While no major country has fully launched a cross-border CBDC yet, the research and development around CBDCs signal a potential revolution in international payments.
  
• Real-Time Payment Systems: As noted, next-generation payment systems (like FedNow, RTP in the U.S., TIPS in Europe, and various Asian “fast-pay” systems) are being linked.
  
  Some consortiums and banks are already enabling connections (e.g. linking Singapore’s FAST to India’s UPI). The Bitcoin Lightning Network is another emerging example of real-time tech: it allows instant, low-cost Bitcoin transfers off-chain, which some companies use by on-ramping/off-ramping to fiat.
  
• AI, APIs and Fintech Platforms: Banks are partnering with fintechs to integrate APIs and use AI for automation. For instance, 62% of banks report working with fintech firms to enhance cross-border services.
  
  Embedded finance (integrating payments into apps) and multi-currency accounts are becoming common. These innovations collectively make cross-border payments more like domestic ones: instant quotes, online tracking, automated FX conversions, and seamless user experiences.

By embracing these technologies in combination – faster rails (SWIFT GPI, FedNow), digital currencies, and intelligent automation – the industry is closing the gap between domestic and international transfers. 

As one analysis put it, blockchain and tokenization are “the biggest infrastructure upgrade to payments in decades,” potentially saving billions in costs by 2030. The U.S. financial sector, with its large fintech community and dollar-centric system, is at the forefront of many of these solutions.

FAQs (Frequently Asked Questions)

Q: What exactly are cross-border payments?

A: Cross-border payments are funds transfers where the payer and the recipient are based in different countries. These include both large interbank transfers (wholesale payments) and smaller consumer or business transactions (retail payments, like remittances or international invoices).

Q: Why do international payments cost more and take longer than domestic ones?

A: Because they pass through multiple banks and systems. Each bank adds processing time and fees, and currencies must be exchanged. Traditional correspondent banking chains are slow and opaque. 

Domestic systems often settle instantly or in minutes, but international transfers can take days and several times more in fees.

Q: How does SWIFT GPI help with cross-border transfers?

A: SWIFT GPI (Global Payments Innovation) is a network that greatly speeds up and tracks international transfers. It has cut typical processing times from days to hours: about 60% of GPI payments arrive within 30 minutes and nearly 100% within 24 hours. 

It also provides an end-to-end tracking ID and fee transparency, so businesses can see exactly where a payment is at each step.

Q: What role do blockchain and cryptocurrencies play in cross-border payments?

A: Blockchains allow value to move peer-to-peer without traditional banks. For example, companies can issue fiat-pegged stablecoins (like USDC) on a blockchain. 

These settle payments in near-real-time (24/7) and typically at lower fees than banks because intermediaries are removed. The blockchain ledger makes transfers transparent and tamper-evident. 

However, purely decentralized cryptos (Bitcoin, Ether) are often too volatile for payments. That’s why stablecoins and (in the future) central bank digital currencies are considered more suitable – they combine crypto rails with stable value.

Q: What is a Central Bank Digital Currency (CBDC)?

A: A CBDC is a digital form of a country’s fiat currency, issued and backed by the central bank. It works much like digital cash or a bank account at the central bank. For cross-border use, CBDCs could allow instant settlement between countries. 

The IMF notes that CBDCs are a “safe, liquid asset” and could let us “redesign” cross-border processes from scratch. Projects like the BIS-led mBridge have demonstrated multi-CBDC networks that can make payments “immediate, cheap and universally accessible”. 

While no CBDC is used globally yet, many countries (including pilot programs) see them as a future cornerstone for efficient international payments.

Q: How can I ensure my cross-border payments comply with regulations?

A: Compliance involves meeting all countries’ AML/KYC and sanctions rules. The best approach is to use service providers or banks that invest in strong RegTech: AI-driven transaction screening, up-to-date sanction lists, and monitoring tools. 

The G20/FATF standards call for enhanced due diligence on international transfers. Structured messaging (ISO 20022) helps by including necessary regulatory data in the payment itself. 

You should also stay aware of new laws – for example, U.S. stablecoin issuers must now obtain charters and follow bank-like compliance under the 2025 GENIUS Act. 

In practice, firms often partner with specialized cross-border payment providers who handle the heavy lifting of global compliance, letting your business focus on its core operations.

Q: Are there any quick-wins or best practices for businesses sending money abroad?

A: Yes. Some immediate steps include negotiating transparent FX fees with banks, using forward contracts to lock rates, and leveraging multi-currency accounts to reduce conversions. 

Where possible, split large payments into smaller ones or use netting services to match cross-border receivables with payables. Also, work with fintech platforms that offer faster rails or stablecoin options for smaller amounts. 

Most importantly, keep informed of technology trends: adopting tools like real-time APIs, payment trackers, and even stablecoin rails for certain corridors can provide immediate gains in speed and cost.

These solutions collectively make cross-border transfers far more efficient. By embracing modern payment infrastructures and digital currency innovations – while also rigorously meeting regulatory requirements – businesses can make international payments that are almost as seamless as domestic ones.

Conclusion

Cross-border payments are complex, but the landscape is rapidly evolving. The top challenges – high costs, slow speed, opacity, fragmented rails and regulatory friction – are well understood and actively being addressed. 

Banks and fintechs are rolling out solutions like SWIFT GPI for transparency and speed, while regulators and standard bodies push ISO 20022 messaging. New technologies such as blockchain, stablecoins and CBDCs offer alternative rails that bypass traditional correspondent banking, promising near-instant and low-cost transfers. 

At the same time, AI and RegTech tools automate compliance and fraud screening, smoothing out processes that were once laborious.

For businesses and finance professionals, the message is clear: adopt the innovations. Use digital tools for tracking and FX hedging, partner with global payment platforms, and stay updated on digital currency developments. 

As regulators like those behind the G20 roadmap emphasize, making cross-border payments “faster, cheaper, more transparent and inclusive” will spur international trade and financial inclusion. 

Companies and banks that successfully integrate these modern solutions will not only improve their operations, but also gain a competitive edge in the global market.