Cross-border payments play an essential role in connecting economies. They allow businesses to import and export, and some workers to send money home to their families. Annual cross-border payment values was expected to reach $250 trillion by 2027, fuelled in part by increased digitalisation and e-commerce. More than £600bn of remittances are sent every year to developing countries — which for some countries accounts for as much as a third of their GDP. These are enormous numbers and likely to grow further.
Despite their importance, many cross-border payments are costly and slow, especially when compared to domestic payments. Cross-border payments have been described as the forgotten corner of the world’s financial plumbing. The BIS Committee on Payments and Market Infrastructure (CPMI) has identified four challenges in cross-border payments: high costs, low speed, limited access, and insufficient transparency. These challenges have real consequences for trade and economic development. The International Monetary Fund (IMF) has estimated that people sending remittance payments home paid $45 billion in fees to intermediaries in 2021. In a recent Mastercard survey, a quarter of businesses said suppliers 'refuse to work with them because of uncertainty over payment times.'
The importance of these challenges is now recognised widely. The G20 made enhancing cross-border payments a priority in 2020 and subsequently agreed quantitative targets for the speed, cost, accessibility, and transparency of these payments. International organisations and public authorities are working on a roadmap of actions to deliver improvements and achieve the targets.
Why It Can Be Challenging to Send Money Across Borders
Why isn’t making payments internationally as easy as sending an email or making a domestic payment?
Making cross-border payments between some countries can be easier and quicker than others. High-volume payment corridors (e.g. between UK and US) are often well-served by correspondent banks and other payment service providers. But in payment corridors with less common currency pairs and lower payment volumes more frictions can occur, ranging from fragmented data formats to costs of sourcing foreign currency funding and lack of competition. For example, while an average SWIFT gpi cross-border payment to the US takes just 12 minutes ...
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