Systemic flaws in correspondent banking and other legacy rails create recurring, but avoidable, global payments challenges. Read our blog to learn more.
Global commerce still relies on legacy cross-border payment rails built for a different era. This article explores the structural constraints of correspondent banking and how modern networks can work alongside existing infrastructure to enable faster, more transparent global settlement.
In an age where information flows instantly over the internet, the global payments system remains slow, fragmented, and out of step with modern commerce. Beneath cross-border trade and corporate invoices lies a tangle of legacy rails that saddles businesses with unnecessary delays, costs, and complexity.
These inefficiencies touch everything. Over the last decade, the value of international payment flows has surged to nearly $1 quadrillion per year. But the average cross-border payment still takes 2–5 days to settle and costs more than 1% of the total transfer amount. Ultimately, the global payments challenges we tolerate as the cost of doing business are a structural drag on cross-border commerce.
Let’s take a closer look at the sources of these payment frictions, the enterprise challenges they create as global volumes scale, and how cross-border settlement can evolve to meet modern commercial demands.
What we live with: today’s payment system, explained
Most of today’s global trade runs on networks designed before the internet existed. These systems functioned well for decades, but are now bottlenecks in the era of instant commerce. To date, most global payments rely on the correspondent banking model and the card networks that facilitate both consumer and corporate transactions.
SWIFT, the backbone of international financial messaging, connects more than 11,000 institutions across 200 countries. But SWIFT only moves information, not money. Settlement still depends on banks holding reciprocal accounts and transferring funds through a chain of correspondent institutions. Each of these intermediaries adds additional costs, delays, and risk.
Card networks, meanwhile, were never designed for large-value or cross-border business payments. Their multi-party structures require different acquirers, issuers, and processors to handle each transaction in sequence, producing multi-day settlement windows and fees that regularly exceed 2–3% of transaction value. For enterprises managing global supply chains, those costs compound quickly.
This architecture has not changed fundamentally in half a century. What has changed is the volume and velocity of commerce now flowing through it, and the mounting opportunity costs resulting from its limitations.
The enterprise cost of global payment inefficiencies
For global enterprises, today’s cross-border payments system results in measurable financial strain. From trapped capital to opaque FX spreads, global payments challenges can tie up liquidity, complicate reconciliation, and raise compliance costs.
Prefunding and trapped capital
Under the correspondent banking model, banks and large enterprises must maintain prefunded accounts, known as nostro and vostro accounts, in multiple jurisdictions to enable cross-border payments. This model immobilizes capital across the globe, with more than $27 trillion sitting idle in nostro accounts at any given time.
For multinational corporations, these idle balances represent working capital that could otherwise fund growth or reduce debt. They also increase the opportunity cost of global expansion, forcing firms to over-capitalize operations simply to maintain liquidity buffers. Combined with multi-day settlement cycles, these prefunding requirements remain one of the largest sources of friction in international finance.
Opaque FX costs
Currency conversion remains one of the least transparent aspects of international transactions. The Financial Stability Board found that foreign exchange (FX) and transaction fees make up over 50% of the total cost of an average cross-border payment. These charges are spread across intermediaries, each adding margins and conversion spreads that are often not disclosed upfront.
For corporate treasurers, this lack of transparency complicates cost forecasting and makes it difficult to benchmark vendor or partner relationships. When exchange rates are finalized after settlement, accounting mismatches can occur, forcing additional reconciliation. Over thousands of transactions, those costs can rapidly erode profit margins and distort pricing across markets.
Time-zone delays and sequential settlement
Unlike domestic payments systems, which are efficient but siloed, cross-border payments are processed sequentially across multiple time zones and banking windows. As a result, the average international transfer still takes two to five business days to settle.
These delays can cause cash flow misalignment for enterprises operating in multiple currencies. Payroll, supplier settlements, or investment transfers that clear instantly in one region may still be pending in another, creating operational uncertainty. In industries where time-sensitive financing or margin calls matter, these delays can translate directly into financial loss.
Redundant compliance workflows
Every intermediary in a cross-border payment conducts its own Know Your Customer (KYC), Anti-Money Laundering (AML), and sanctions checks. This duplication adds cost without materially improving security, with KYC/AML checks accounting for roughly 15% of compliance costs in the cross-border payment industry.
For many organizations, this regulatory redundancy translates into rising staffing and audit expenses, especially when operating in far-flung markets with diverse rulebooks. Compliance bottlenecks can also delay deal execution, as teams wait for counterparties to clear multiple independent screenings.
Siloed data and reconciliation friction
Each participant in a transaction, from the sending bank to the recipient, may record the payment details differently, despite standardization efforts like ISO 20022. Delays and risks are compounded by manual processes, with 84% of US and UK payment firms continuing to rely heavily on spreadsheets and other hand-checked tools to reconcile payments.
These discrepancies create data silos that make it difficult to track payments, match invoices, and reconcile accounts across disparate systems. For enterprises processing thousands of international transactions each month, even small data mismatches can ripple across departments, slowing reporting and reducing operational agility.
Why payment inefficiencies are tolerated
For decades, systemic global payments challenges have been mostly viewed as facts of life, instead of avoidable flaws. As a result, banks, businesses, and even regulators have adapted to a system that is slow but predictable, and trusted despite its opacity.
Even cost-sensitive organizations have learned to tolerate these inefficiencies because the financial infrastructure that creates them is deeply entrenched. Most major institutions have invested heavily in compliance, risk systems, and operational processes tailored to these slow-moving rails, creating high switching costs.
On top of that, systemic change is hindered by the fragmented nature of global payments regulation. Each jurisdiction governs its own settlement systems, liquidity standards, and compliance requirements, which makes large-scale change difficult to coordinate.
The result is a global payments industry that recognizes its inefficiencies but continues to build around them. So businesses have developed workarounds, such as holding excess cash and extending payment terms to offset uncertainty in settlement timing. But these strategies simply make the most of today’s payment inefficiencies without attempting to solve their underlying causes.
A new standard for global payments
Addressing today’s global payments challenges calls for an evolution in settlement that moves toward more transparent, real-time value transfer that can be layered onto existing banking infrastructure and enterprise technology stacks.
To achieve this, a next-generation settlement network must deliver some essential capabilities:
- Speed and finality: Payments should clear and settle near-instantly across currencies and jurisdictions, reducing unnecessary float and uncertainty.
- Transparency and traceability: All participants should have real-time visibility into transaction status, fees, and FX rates from initiation to completion.
- System interoperability: Systems should speak a common technical and regulatory language so banks, enterprises, and payment providers can transact seamlessly across borders.
- Built-in compliance: Regulatory checks, sanctions screening, and reporting should move within the transaction itself, reducing duplicated efforts and costs.
This vision aligns with a broader shift in financial infrastructure — one that moves from siloed, sequential systems to open, programmable networks. The goal is not to rebuild existing rails one market at a time, but to create shared standards that let value move globally as easily as information moves online.
Circle Payments Network: the system modern enterprise deserves
While today’s global payment system continues to function, it does so with an unnecessary amount of friction that has unfortunately been normalized.
Reimagining this infrastructure means shifting from a patchwork of national systems to a unified global network built for the internet era. Leading the way is Circle Payments Network1 (CPN): a global ecosystem of banks, payment service providers (PSPs), virtual asset service providers (VASPs), and enterprises, to enable always-on, real-time settlement using stablecoins such as USDC2 and EURC.3 Underpinning CPN is Circle’s programmable payments infrastructure, Arc, which provides the institutional-grade settlement layer that enables enterprises and financial institutions to integrate real-time settlement directly into their existing systems.
CPN is built to operate continuously and to move value near-instantly and transparently. Each transaction carries its own compliance, reporting, and audit logic, resulting in a more open, efficient financial system where trust, transparency, and speed coexist. Rather than treating today’s payment costs and delays as an unavoidable burden, CPN creates a single foundation for modern money movement, built for a more interconnected world.
Those interested in joining the network can learn more about how CPN works in our guide and register through the official CPN webpage.
1 Circle Technology Services, LLC (CTS) is the operator of Circle Payments Network (CPN) and offers products and services to financial institutions that participate in CPN to facilitate their CPN access and integration. CPN connects participating financial institutions around the world, with CTS serving as the technology service provider to participating financial institutions. While CTS does not hold funds or manage accounts on behalf of customers, we enable the global ecosystem of participating financial institutions to connect directly with each other, communicate securely, and settle directly with each other. CTS is not a party to transactions between participating financial institutions facilitated by CPN who use CPN to execute transactions at their own risk. Use of CPN is subject to the CPN Rules and the CPN Participation Agreement between CTS and a participating financial institution.
2 USDC is issued by regulated affiliates of Circle. See Circle’s list of regulatory authorizations.
3 EURC is issued by regulated affiliates of Circle. See Circle’s list of regulatory authorizations.
