Cross-border payments are the transfer of value between parties in different countries, often involving different currencies and banking systems. Learn more.
Money moves the world forward, and much of that movement happens across borders. According to FXC Intelligence, the global cross-border payments market was valued at roughly $195 trillion in 2024 and is projected to climb to around $320 trillion by 2032. Within that, non-wholesale payments accounted for about $40 trillion in 2024 and are expected to expand by more than 60% to $64.5 trillion over the same period. These flows keep global commerce connected, finance supply chains, and enable institutions and individuals to exchange value internationally.
Despite their importance, the systems that power cross-border payments haven’t changed much since the mid-20th century. Each transfer goes through a tangled web of banks, intermediaries, and compliance checkpoints, which add costs and friction at every step.
Given their significance, it’s worth examining how cross-border payments work, why the traditional system creates challenges for institutions and individuals alike, and what a more efficient, modern cross-border payment solution looks like.
What are cross-border payments?
At its simplest, a cross-border payment is a transfer of value between parties in different countries, often involving different currencies, banking systems, and regulatory environments. These payments can range from a corporate invoice between multinationals to a remittance sent by a worker abroad to their family at home. In short, cross-border payments are the connective tissue of international finance.
How cross-border payments work
There is no single network that processes payments worldwide. Instead, most transactions rely on a patchwork of domestic systems connected through correspondent banking. This structure allows banks to move funds between countries even without a direct presence, but it also introduces multiple layers of complexity, cost, and risk.
Here’s how a typical cross-border payment flows through the system today:
- Payment initiation: A sender requests a transfer (often in their local currency) through their bank or a cross-border payment company.
- Conversion and funding: The originating bank converts funds to the required foreign currency and draws on a reserve account it holds with a foreign partner bank.
- Routing through intermediaries: If the foreign partner bank does not have a direct relationship with the recipient’s bank, the payment passes through one or more correspondent banks, each charging a fee and conducting compliance checks.
- Settlement and reconciliation: The final receiving bank credits the beneficiary’s account once all intermediaries have cleared their obligations.
- Reporting and confirmation: The sender’s financial institution receives confirmation messages that the payment has been completed or credited. The bank then notifies the sender through its own customer channels — for example, via online banking or a transaction receipt.
To visualize this, imagine a German importer paying a supplier in Singapore. The German bank initiates the payment in euros, which may pass through a UK or US intermediary holding accounts in both currencies before reaching the supplier’s bank. Each player in the chain validates data, applies foreign exchange (FX) conversion, and deducts a small fee before the supplier is finally credited in Singapore dollars.
In short, this system works, but it is far from frictionless. Every intermediary adds time, cost, and uncertainty across this reliable, but fragmented, process.
Shortcomings of today’s cross-border payment system
Behind every successful international transaction lies an intricate process that is rarely visible to end users. While dependable, the current system is slow, fragmented, and costly to operate. According to the Financial Stability Board (FSB), cross-border payments continue to be constrained by four main challenges: high cost, low speed, limited access, and poor transparency. On top of that, inconsistent regulatory requirements make it even harder for businesses and individuals to transfer and use money efficiently across borders.
High and unpredictable costs
Moving money internationally is expensive. Each intermediary bank charges processing and conversion fees, while FX rates fluctuate across corridors. These costs compound, making some transactions too costly for low-value transfers and raising total expenses for large corporate flows. Taken together, these inefficiencies add an estimated $120 billion in annual costs to the global financial system.
For global businesses, these costs distort cash flow and complicate financial planning. For individuals, they erode the amount received by families abroad. The World Bank estimates that average remittance fees are around 6.5% as of March 2025, far above the UN’s global target of 3%. These high and variable costs also burden businesses, which struggle to effectively manage liquidity and reconcile payments across jurisdictions and currencies in real time.
Slow settlement and limited visibility
While domestic systems like Faster Payments, SEPA Instant, and UPI now clear transactions in seconds, cross-border payments can often take anywhere from one to five business days to settle. When two banks keep accounts with each other, moving money between them is straightforward. If they don’t, Bank A uses a correspondent bank that does have ties to both sides. But depending on the currency or corridor, one correspondent might not be enough. In that case, Bank A sends the payment to one correspondent, which passes it on to another that can complete the transfer to Bank B. Each extra step adds time, cost, and potential failure points. (Also of note is the fact that these systems process transactions in batches rather than simultaneously, adding to the duration and opacity of a transfer.)
SWIFT’s data shows that while roughly 90% of payments reach the recipient bank within an hour, the actual crediting of funds often occurs much later. This process can extend beyond three to five days in some corridors, with little visibility into how long this process will take. This delay has real economic consequences, and makes financial planning and capital deployment more costly and difficult for anyone transacting across borders.
Liquidity constraints and trapped capital
Perhaps the least visible cost of the current system is the amount of money locked up to make it work. To guarantee that payments clear smoothly, banks must pre-fund foreign accounts (known as “nostro” and “vostro” accounts, where a nostro account represents an account held in a foreign bank, and a vostro account represents the same from the perspective of the foreign bank) in multiple currencies. These balances act as buffers but immobilize capital that could otherwise be used to generate returns or finance growth.
With global corporations moving nearly $23.5 trillion across countries annually (equivalent to roughly 25% of global GDP), the amount of capital trapped in these intermediary accounts is constantly fluctuating, but consistently high.
And, it’s nearly impossible to bypass banking inefficiencies within the traditional system. In a global BIS survey among central banks covering 184 payment systems across 76 jurisdictions, only 6.8–10.9% of jurisdictions covered allowed both direct (i.e., bank) and indirect (i.e., non-bank) access to the payment systems — meaning that most jurisdictions’ payment systems remain bank-centric. Global initiatives such as the G20 Cross-Border Payments Roadmap are trying to harmonize compliance and data exchanges. But as long as the legacy banking system is central to cross-border flows it may be difficult, if not impossible, to avoid duplication of work, delays, and rising costs.
Differing policies across jurisdictions
Cross-border payments must comply with a maze of regulatory frameworks that differ by country, institution, and transaction type. Each regulated financial institution is independently responsible for compliance, which means that every intermediary in a payment chain, from the originating bank to the final beneficiary’s institution, is required to perform its own anti–money laundering (AML), counter-terrorist financing (CFT), and sanctions screening checks. In practice, this means the same payment can be reviewed multiple times using different rule sets and data standards, multiplying cost and delay across the network.
Beyond the inconsistencies in cross-border transaction regulations, many global payment service providers still rely on legacy systems that were never designed to carry rich structured data about customers or due diligence. Inconsistent data entry (e.g., “St.” vs “street”) means each intermediary must often reinterpret or manually map data. Because there’s no single global standard for what information must be collected, stored, and transmitted during payment screening, PSPs and banks interpret rules differently, which makes it difficult for these systems to effectively detect, let alone prevent, fraudulent transactions. (It also leads to a high rate of false positives during transaction screening, which is why as much as 95% of AML alerts globally turn out to be false.) This lack of clear, consistent cross-border payment regulations ultimately results in duplicate work, inconsistent data, and costly issues that delay legitimate payments.
Banking challenges with cross-border payments
For banks and other major financial institutions, modernizing cross-border payment processes is now an existential priority. Banks are the backbone of the cross-border payment system, yet the system’s inefficiencies directly weigh on their balance sheets. Every transaction requires liquidity, operational oversight, and regulatory checks across multiple jurisdictions.
At the same time, client expectations are shifting faster than ever. Corporate clients increasingly demand faster settlement and end-to-end payment visibility, while regulators are introducing stricter real-time reporting obligations under regimes like the EU’s MiCA and ISO 20022 migration standards.
Many of these capabilities are not achievable through incremental improvements to banking’s current correspondent rails. That means these changes require the traditional correspondent model to evolve from a static infrastructure to a dynamic network that can support programmable, transparent transactions.
Enterprise challenges with cross-border payments
For multinational enterprises, cross-border payment efficiency directly impacts their competitiveness. Businesses rely on accurate, timely cross-border transactions to pay suppliers, employees, and partners. Even small delays in settlement can tie up cash across supply chains, weaken negotiating leverage with overseas suppliers, and complicate cash-flow forecasting in an increasingly interconnected global economy.
Because FX rates, fees, and settlement windows vary across corridors, enterprises struggle to budget precisely. A supplier payment executing in five days may cost more or settle at a worse exchange rate than expected. That volatility makes forecasting difficult and hedging more expensive.
As a result, enterprise finance teams are increasingly seeking cross-border payment solutions that integrate with their treasury systems for real-time status, standardized data, and multi-currency liquidity paths. These tools help reduce manual reconciliation, anticipate cash needs, and detect failures before they cascade. In effect, enterprises want dollar-in, dollar-out certainty across borders, which is something the legacy payment system cannot reliably provide.
Retail challenges with cross-border payments
At the individual level, cross-border payments are deeply personal. In order to support loved ones, fund education, or pay for services abroad, millions depend on remittances: the transfer of funds from the country of work back to a home country. In 2024, remittances accounted for 3% or more of the GDP for over 60 countries.
But these high-volume, low-to-medium value transfers are currently burdened with high costs and unpredictability. The World Bank’s monitoring shows that average global remittance costs remain near 6.5%, translating to billions lost to fees each year. And in the “WB6” corridor group of emerging markets, roughly a fourth of remittance corridors charge over 10% per transfer in fees and FX conversion costs.
Beyond remittances, a growing number of individuals make cross-border payments for everything from e-commerce to travel. According to Worldpay’s 2024 Global Payments Report, cross-border online purchases now account for ~18% of global e-commerce volume. But these transactions face similar inefficiencies, with consumers facing high FX spreads and merchants reporting higher chargeback or settlement costs for international transactions.
Whether sending money home or shopping from abroad, individuals increasingly expect cross-border payments to work as instantly and transparently as domestic ones. Meeting that expectation will require modern infrastructure that unites low-cost settlement, clear pricing, and universal acceptance across digital and physical economies.
Bringing cross-border payments into the internet era
The traditional cross-border payment system is functional, but outdated. Its layered structure slows movement, increases costs, and limits transparency. Addressing these challenges requires rebuilding financial infrastructure for the modern world, where value moves continuously and globally.
As a result, future payment systems must deliver key capabilities: faster settlement, standardized interoperability, and embedded compliance that travels with transactions. These pillars are essential to creating an efficient, trusted, and accessible global network for money movement.
Circle Payments Network (CPN) represents this much-needed advancement in cross-border payment infrastructure. At its core, CPN connects 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 USDC and EURC. It acts as a bridge between the world of crypto assets and the regulated financial system.
The network’s first live transfer was a cross-border payment completed in under two minutes — a stark contrast to the multi-day processing times of traditional rails. While much of the impact is behind the scenes, end users benefit through faster settlement, lower costs, and greater transaction transparency. For financial institutions and enterprises, CPN offers a standardized and compliant way to integrate digital currency payments without the complexity of building new infrastructure from scratch.
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 entities of Circle. See a list of Circle’s regulatory authorizations for more information.
3 EURC is issued by regulated entities of Circle. See a list of Circle’s regulatory authorizations for more information.
