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Even as advances in technology increase the speed of cross-border payments, geopolitical challenges are blocking consumers’ ability to send money where they want.
Developments in open banking, artificial intelligence (AI), instant payments, fraud prevention, cybersecurity and digital currencies could significantly increase the efficiency and seamlessness of payment systems around the world over the coming decade.
These factors have the potential to offer big improvements to the payments landscape, which today features competing systems and a lack of interoperability.
However, there is an irony in the growth of payments: as the technology and understanding of how payments can interoperate across borders, continents and regions improve, the relationships between key players are worsening.
The Swift messaging service, for example, has made it technically straightforward for someone in New York to send money directly to Moscow, yet politics make it impossible in practice — Russia has been banned from the network since its invasion of Ukraine in February 2022.
Interesting times
Protectionism and corresponding regulatory action in the US and elsewhere are also slowing progress.
The worsening relationship between the US and China and the threat of an extended trade war mean cross-border payments between the two countries are increasingly difficult for the average person.
In addition, China's restrictive payment system is particularly difficult for western tourists to use.
Helena Forest, executive vice president for real-time payments product and commercial at Mastercard, told Vixio that this dynamic means “it's a very interesting time we're living in”.
“On one hand, we have a rise of economic protectionism,” she said. “There's a huge amount of fragmentation that does impact the financial, and especially the cross-border, flows. On the other hand, you have a number of initiatives and projects that are forming strategic alliances and aiming to increase global connectivity.”
The World Bank has warned that “misguided populism in many countries is doing serious damage to global trade today” and that “many countries have lost their appetite for new trade agreements”.
It notes that almost 3,000 trade restrictions were imposed across the world in 2023, close to five times the number in 2005.
The bank suggests that policymakers are seeking opportunities to reaffirm fundamental principles, such as the need to lower trade barriers and avoid distortive domestic policies, while striving to build a level playing field for international commerce.
Connecting through payments
The move towards real-time payments has the potential to play a key role in connecting individuals across borders.
More than 80 jurisdictions now have access to real-time payment systems, so cross-border transactions are faster and more efficient.
Nasir Ahmed, head of the Americas and UK region at Swift, identified the attraction of real-time payments: “Customers value things like predictability, they value things like transparency, they value traceability.”
Technology providers generally tend to move at the pace of customer demand, but other sources expect significant increases in expectations of global payments capabilities.
“If you step back and think about it, we have the greatest technological tools that we have ever seen — the limitations aren’t about technology anymore,” said Tom Halpin, head of global payments solutions North America for HSBC.
“It’s about our willingness to adopt and embrace the change. I hope that in five years the focus will be more about wallets and about how you provide data and insights that enhance the value of your customer.”
Technical requirements
In cross-border payments, transparency, security and control are as crucial as speed and cost.
In an October 2024 report, Citi highlighted the findings of its Treasury and Trade Solutions (TTS) survey of around 100 financial institutions globally, including banks, fintechs and insurance companies.
Respondents said that the biggest problem facing cross-border payments is that different systems use different messaging standards, with market fragmentation causing serious concern.
The ISO 20022 messaging standard intended to fix this is being rolled out slowly, but should be fully in place by the end of 2025.
However, a further irony is that, with Russia banned from Swift, one of the early champions of the standard is locked out of its benefits.
As global relations worsen, the payments industry is likely to evolve in ways that go around sanctions and restrictions.
Cryptocurrencies, for example, know no borders — for consumer payments, if not wholesale, they may provide a solution where traditional systems cannot.
