Interoperability and Transparency Are Key Challenges as Cross-Border Payments Modernize

When three quarters of a given market are dissatisfied with the way things are going, that’s a market ripe for innovation and technology in the service of making things better. 

No matter where you look, cross-border payments are tied to hundreds of billions of dollars of volume, as transactions move internationally, powering commercial commerce (and, for consumers, remittances) across a variety of use cases. 

Those findings were underscored in a paper released this past week by the U.S. Faster Payments Council. In that document, titled “The Practicalities of Cross-Border Payments in a Faster Payments World,” the council found that in the past decade, the volume and value of cross-border payments has increased by a respective 61% and 37%, per data from the Bank of International Settlements.

“To keep pace with financial institutions, payments infrastructure must continuously adapt and change for new technologies, new industry initiatives, mandates, and regulatory and compliance directives,” the Council wrote. 

Widespread Dissatisfaction 

And yet:  

PYMNTS Intelligence found that only 23% of smaller businesses say that current cross-border payment solutions are “very or extremely satisfactory.” That leaves the vast majority of companies wanting more. Cross-border payments’ processing times are hardly standardized, which in turn means that SMBs have challenges with cash flow visibility.  

The payments systems are far flung and have different reporting standards, and the migration to ISO 20022 has been staggered out into several stages and across a timeframe stretching out across the next several months.

For the banks, as we’ve noted in the initial forays into the earnings season that has just begun, banks are logging gains in corporate-client related payments and revenues. Over the long term, as Jim Colassano, senior vice president of RTP product development at The Clearing House (TCH), told PYMNTS in a separate interview, “cross-border, instantaneous payments is the holy grail of payments.”

Manufacturing shines as an industry in the need of a digitally driven, faster payments pivot. The embrace has been real, as PYMNTS found across a variety of sectors. As PYMNTS Intelligence found recently, 99% of manufacturers are already utilizing real-time payments for their B2B transactions. In retail, 17% of B2B payments were made via real-time payments in 2023. And 47% of all companies surveyed said they’d planned to reduce their reliance on paper checks.

Against that backdrop, separate PYMNTS data shows that two-thirds of financial institutions (FIs) are either “very” or “extremely” willing to invest in new technology to solve cross-border B2B pain points.

We’ll know more, too, when the payments networks report earnings, and as Visa and Mastercard in particular spotlight the ways in which new fund flows and digital initiatives are impacting B2B payments.

In September, to name one example, Visa and Swift announced a collaboration aimed at streamlining international B2B payments. Inherent in the collaboration is Swift Payment Pre-validation, which allows upfront checks of Visa B2B Connect payments, catching potential errors before the payment is initiated, reducing unnecessary delays.