Future of Cross-Border Payments: Role of Banks in a Globalized World
- Editor
- Sep 17
- 4 min read
by KarNivesh | 17 September, 2025
The global payments industry is undergoing one of the biggest transformations in history. Cross-border payments—the movement of money between people and businesses across different countries—are at the center of this change. Traditionally handled by banks through complex networks, these payments are now being reshaped by financial technology (FinTech), blockchain, central bank digital currencies (CBDCs), and new regulations.
The stakes are massive. The global cross-border payments market is expected to reach nearly ₹26,560 trillion by 2032, growing steadily at 5.3% every year. This isn’t just about faster technology—it’s about rethinking how money moves in a world where speed, transparency, and trust matter more than ever.
What Are Cross-Border Payments?
Cross-border payments power global trade, e-commerce, remittances from migrant workers, and the international operations of companies. Whenever money flows between two countries, it passes through different currencies, regulations, and banking systems.
Today, these payments mostly work through correspondent banking networks, where banks maintain accounts with each other to settle payments. While this system is trusted and reliable, it has many pain points that are pushing the need for innovation.
Challenges in Traditional Cross-Border Payments
High Costs
Fees are very steep. On average, consumers pay more than 11% in fees, while businesses pay around 1.5%.
This is because multiple middlemen take a share in the process.
Slow Transactions
Payments can take 3–5 business days to clear. Time zones, manual checks, and regulations add further delays.
Lack of Transparency
Senders and receivers often don’t know where the money is until it arrives. Hidden charges and poor exchange rates worsen trust.
Decline of Correspondent Banking
Many banks have reduced their cross-border partnerships since 2011 due to compliance costs and risks. This has made payments harder and more expensive for customers.
These inefficiencies have opened the door for technology-driven solutions.
The Technology Revolution in Cross-Border Payments
1. Blockchain
Blockchain offers instant settlements, higher security, and lower costs. By 2030, blockchain-based systems could cut costs dramatically, creating savings of over 3,300% compared to today.
2. Stablecoins
Stablecoins are cryptocurrencies tied to stable assets like fiat currencies. Their supply has jumped from ₹4,160 crore to over ₹18.3 lakh crore in just five years. In 2024 alone, they processed transactions worth ₹26.56 lakh crore, of which nearly ₹4.98 lakh crore was used for payments.
3. CBDCs (Central Bank Digital Currencies)
Around 90% of central banks worldwide are exploring CBDCs. These digital versions of regular money could provide 24/7 cross-border payments, backed by central banks for trust and stability.
Projects like Dunbar and Jura have already shown CBDCs can make global transactions cheaper, faster, and more transparent.
4. ISO 20022
This new global payment messaging standard will replace older systems by November 2025. It enables richer data, fewer errors, and faster automation, which will benefit banks and customers alike.
5. Artificial Intelligence (AI)
AI and machine learning are improving fraud detection (cutting fraud by nearly 50% by 2025), compliance checks, and customer support.
How Banks Are Changing
Banks are no longer just competing with fintech firms—they are collaborating. Digital transformation is no longer optional; it’s essential.
Customers now expect real-time service.
Banks can cut costs by 30% using cloud and automation.
APIs allow businesses and banks to share data in real-time, giving better control over currency risks.
Many banks now partner with fintechs through models like:
Banking-as-a-Service (BaaS): Fintechs use bank infrastructure via APIs.
Embedded Finance: Payment services integrated directly into apps like e-commerce or ride-hailing.
Joint Ventures: Banks and fintechs building new solutions together.
Examples include Goldman Sachs with Apple, JPMorgan with PayPal, and HSBC with Bud.
CBDCs: The Future of Money
CBDCs are one of the most important innovations for cross-border payments. Unlike cryptocurrencies, they are regulated, stable, and government-backed.
For example:
Project Inthanon-Lion Rock (Thailand & Hong Kong) showed CBDCs could settle payments within seconds.
SWIFT is testing CBDC transfers across borders with positive results.
Different models exist—direct, indirect, or hybrid—depending on how central banks and commercial banks share roles.
The Role of Regulation
Cross-border payments involve strict rules because they are linked with money laundering (AML) and terrorism financing (KYC) checks. These require more than 20 data points per transaction, slowing the process.
Global regulators like the G20 and BIS are working on making systems cheaper, faster, and more inclusive by 2027 and 2030.
Regulatory sandboxes in some countries now allow banks and fintechs to test innovations in controlled environments.
Global Success Stories
Different regions show how innovation can reshape payments:
Brazil’s Pix: A government-backed instant payments system that has grown rapidly due to wide participation and low costs.
India’s UPI: Already being used internationally in Singapore, UAE, and other Asian countries. Partnerships like Project Nexus aim to connect India, Malaysia, Singapore, Thailand, and the Philippines.
Europe’s SEPA: A unified euro payments area supported by ISO 20022.
The Road Ahead
By 2028:
42% of cross-border payments will be instant, up from 17% in 2024.
Stablecoin payments may jump to 20% of global payments, creating an opportunity worth ₹49.8 lakh crore.
Future innovations include:
The “Finternet”: A global financial ecosystem connected like the internet.
Tokenization of assets: Allowing instant, safe transactions of tokenized stocks, bonds, or commodities.
Challenges remain—mainly cybersecurity, interoperability, and regulatory differences across countries.
What Banks Should Do
Invest in Technology – Modernize systems for real-time payments and blockchain.
Form Partnerships – Collaborate with fintechs for customer-friendly solutions.
Prepare for ISO 20022 – Upgrade systems before old formats are phased out.
Educate Customers – Simplify complex new payment options for users.
Strengthen Risk Management – Tackle cybersecurity and liquidity risks.
Conclusion
The future of cross-border payments is bright but challenging. Banks that embrace technology, build fintech partnerships, and adapt to regulations will lead the way. Those that resist will risk falling behind.
This shift is not just about technology—it’s about reimagining the movement of money in a connected world. By 2030, banks will need to balance speed with security, innovation with regulation, and global reach with local expertise.
The story of cross-border payments is still being written. The banks and institutions that prepare now will be the ones shaping the next chapter of global finance.
Comments