From Days to Seconds: The Push for Instant Cross-Border Payments

Domestic payments have become increasingly instant in recent years, with countries like India (UPI) and Brazil (PIX) leading the way. Today, instant payments—24/7 transactions completed within seconds, often at little to no cost—are available in over 70 countries, with rapid adoption expected to continue. ACI Worldwide reported that real-time payments reached 266.2 billion transactions globally in 2023, reflecting a 42.2% year-over-year growth, with volume projected to reach $575.1 billion by 2028.

This shift has raised expectations among consumers and businesses for faster, more efficient, and transparent payments.

However, cross-border payments — transactions where the sender and recipient are in different countries — still lag significantly. Unlike domestic transactions, international transfers can take days to complete, are costly (for example, a €100 cross-border payment might cost 8 to 11%), and often lack transparency and traceability. Given that cross-border payments span across 195 different countries with diverse payment systems, regulations, and technological maturity, it is no wonder these transactions are more challenging. Yet, with $150 trillion in cross-border payments processed in 2022 and projections pointing to $290 trillion by 2030, the demand is rapidly growing for faster, more efficient, and more transparent cross-border solutions.

Achieving this level of speed and transparency in cross-border payments is not straightforward due to challenges such as:

• Multiple Intermediaries: Traditional cross-border payments often pass through several intermediary banks, each adding time and fees.

• Currency Exchange: Currency conversions introduce added layers of complexity and cost.

• Regulatory Variations: Each country enforces unique regulations and compliance standards, slowing the process.

• Limited Operating Hours: Domestic payment systems, even those that are real-time, often operate only during business hours, leading to delays when coordinating across time zones.

The G20, whose members represent 85% of global GDP, has set ambitious goals: by 2027, 75% of cross-border payments should be executed within one hour, and the rest within one business day. Several initiatives are underway (or are already delivered) to meet these targets and improve speed, cost, reliability, and transparency in cross-border payments.

Traditionally, cross-border payments relied on SWIFT — a secure, standardized communication network for over 11,000 financial institutions — and international wire transfers. Today, new players and payment "rails" are emerging. Initiatives range from compliance standardization and adoption of the ISO 20022 messaging format to domestic payment system interconnections and innovative solutions from fintech companies that offer real-time, cost-effective cross-border transactions by leveraging their own international network.

Some noteworthy examples are:

• Swift GPI (Global Payments Innovation): Launched in 2017, this SWIFT solution offers safer, faster, and more reliable cross-border payments. Over 4,000 financial institutions already use GPI, with 50% of transactions now completed within 30 minutes and 96% within 24 hours. Additionally, the GPI Tracker further enhances transparency by allowing corporate clients and financial institutions to track a payment end-to-end, as it transitions between different (intermediary) financial institutions.

• Project Nexus by BIS (Bank for International Settlements): This ambitious project aims to standardize how instant payment systems across different countries connect, creating a single integration point. Initial rollouts with central banks in Malaysia, Singapore, and the Philippines are expanding to include India. Nexus is expected to be fully operational by 2026.

• IXB initiative of EBA Clearing and The Clearing House (TCH): This initiative links Europe’s RT1 system with the US’s RTP network, enabling instant cross-border transactions between euros and US dollars.

• Cross-currency settlement in TIPS by ECB: The European Central Bank’s TIPS (Target Instant Payment Settlement) is working on cross-currency settlement options, starting with the euro, Swedish kronor, and Danish krone.

• European Payment Council’s OCT Inst Scheme: Designed for European banks to send and receive instant payments from outside the EU, this scheme aims for transparency and rapid execution, with pilots in Spain easing cross-border transactions.

• UPI Bilateral Linkages: India’s UPI (Unified Payments Interface) system, a benchmark for domestic instant payments, is expanding globally through partnerships with countries like Singapore, Sri Lanka, Mauritius, the United Arabs, Bhutan and Nepal, allowing for real-time cross-border transactions.

• PIX Bilateral Linkages: Brazil’s PIX is establishing connections to enable instant payments with neighbouring countries like Uruguay, Paraguay, and Argentina.

• Visa Direct’s network: Visa is increasingly positioning its global network to facilitate real-time cross-border payments, as seen in its recent partnership with Revolut, which enables business customers to transact across 78 countries in 50 currencies.

• Fintech players leveraging internal networks: Companies like Wise, Transfermate, Payoneer, PayPal and others have streamlined cross-border payments by using internal networks, liquidity pools, and rebalancing mechanisms to reduce costs. Blockchain and stablecoin-based options are also emerging, with players like Ripple, Stellar, Fuze, BVNK, Circle and Sling pioneering digital solutions for cross-border transactions.

Although these advancements signal exciting progress, the journey toward truly instant cross-border payments continues. Overcoming regulatory, technological, and infrastructural hurdles is still essential, but the rapid pace of innovation brings us closer to a future where international payments match the speed of domestic ones.

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