Natalie Monko Lead Project Manager

    Overcoming Cross-Border Payment Challenges in 2022

    Cross-border payments play an essential role in the modern interconnected economy: the volume of international payments is predicted to reach almost $40 billion by 2026. But even though we live in a world of global business and international travel, a universal payment system for transactions all over the globe is yet to be created. Although there are such networks as SWIFT that facilitate international transactions, none of them are adopted by all countries, and international transfers still suffer from slow transaction speed, lack of transparency, high fees and unpredictable exchange rates.

    Innovative fintech startups driven by digital technologies aim to change the situation by devising alternative solutions to often inconvenient international transaction processes of established financial corporations and banks. From creating independent networks to enhancing the existing banking solutions, fintech companies are changing the landscape of cross-border payments, making them faster, cheaper and safer. 

    Surf team has an extensive track record developing apps for banks, trading platforms and creating solutions in the sphere of Artificial Intelligence (AI) and Machine Learning (ML). In the article, we’ll review the current challenges of cross-border payments and how fintech companies are solving them.

    Main challenges

    There are several aspects to both individual and corporate cross-border payments that make them a sort of a bottleneck to otherwise streamlined business processes. The most important of them are speed, cost, transparency and risks associated with fraud and compliance.

    Slow transaction speed

    Cross-border money transfer usually takes 2-5 days to process, which is slow compared to almost instant in-country transfers. A payment from one country to another might go through several intermediaries in other third-party countries, depending on the payer’s and payee’s banks. 

    One of the reasons behind such long processing times is the lack of standardization and automation across banking networks and payment infrastructures. Because banks in different countries often use incompatible formats, many cross-border payments are made as intra-bank transactions when the payee receives funds on the account in the foreign bank that the payer used to send them. If banks on both ends don’t belong to any cross-border payment system, such as CHIPS (Clearing House Interbank Payments System), the route of international transfer might look really complicated. 

    For example, if the US-based company sends money to a South Korean entity through a bank, which is not CHIPS-member, the bank has to request another bank to send funds via CHIPS to a third bank that serves as a correspondent bank in the US to the receiving bank in the destination country, which then transfers funds to the receiving bank. 

    company to bank flow

    As a result, many cross-border payments take days to process which does not suit the modern high-paced business environment.

    High costs

    Due to different factors, fees for international payments can get very high. But the main reason behind it is the same as low transaction speed: a large number of intermediaries involved in a money transfer. Every correspondent bank charges money for its services. Other factors include regulatory and compliance costs, as well as currency conversion fees. Since the price of a transaction plays a key role for businesses and individuals when choosing a payment provider, financial institutions that do not offer competitive rates risk losing clients to competitors.

    Security issues

    Cyberattacks pose a big problem for international payments since a weak spot in any of the banks involved in the transfer can be used to steal money. Because every country has its own regulations regarding transaction security, there is no guarantee that the receiving bank adheres to the same high security standards as the sending bank or vice versa. Top-notch security infrastructure comes at a high cost, but the potential fees and reimbursements for stolen money can be even higher.

    Another common problem with international payments is the prevention of fraud and terrorist financing. For banks, it is important to find a balance between verifying and checking client identity without dragging out the process and not doing enough due diligence and risking reputation damages and serious penalties.

    Lack of transparency

    In international payments, payer and payee are often unable to track transaction’s status online and a large number of intermediaries makes it even more difficult to contact the right entity in case of the payment’s halt or investigation. This goes hand in hand with a lack of clarity regarding all incurring fees and deductions. It’s safe to say that everyone has at least once experienced how unexpected fees dramatically increase (or decrease) an overseas payment. Such unpredictability doesn’t suit business and directly impacts its profits, forcing companies to seek alternatives to traditional bank transfers.


    The sphere of finance is one of the most tightly regulated by governments across the world. For example, payment service providers in the US should follow these regulations: Know Your Customer (KYC),  Basel III, The Patriot Act, Sarbanes-Oxley, Federal Financial Institutions Examination Council (FFIEC) — just to name a few. With cross-border payments that should adhere to rules established by countries of both payer and payee, the problems double up: banks have to constantly monitor changes in regulation in every destination country they send money to and adjust their policies accordingly. Often this leads some banks to a decision not to offer international transfers at all or strictly limit them. Learn more about compliance requirements for finance in our dedicated article.


    Another challenge that payment providers face is a lack of universal standardization. If a payer provides transaction data in a format that is not understood by a payee’s bank, the transaction would require manual processing, further increasing the time required to receive funds. For example, an international payment messaging standard ISO 20022 (the so-called ‘language of payments’) has been adopted by 70 countries, meaning there is still a long way ahead until it becomes a universally recognized standard.

    What solutions fintech offer

    International borderless networks: Wise

    Wise, formerly known as TranferWise, says it helps move over $56 billion every year across the world, with about a fourth of that money being business payments. The company has an international network of local accounts, so, technically, the money never leaves the payment system as the payee receives money from their local branch of Wise. This allows clients to make cross-border transfers in less than 2 days, which is a significant improvement compared to traditional banking transfers. 

    TransferWise screen

    Wise also boasts that it saves its clients around $1 billion in fees every year: for individuals, the fixed cost of money transfer to many countries is a flat amount of around $1 plus less than 1% of the payment. But while the company’s partnerships with corporate expense management platform Emburse and accounting platform Xero attract small and medium-sized businesses, the maximum single transaction limit of $1 million makes Wise not the best choice for large international corporations.

    Blockchain: Ripple 

    Ripple is a blockchain-based payment provider that allows processing of international payments in a matter of seconds. To facilitate fast conversion between different currencies the platform uses its own digital currency (token) — XPR that serves as a temporary settlement between two currencies. To validate transactions through its decentralized system, Ripple uses consensus protocol, which ensures that every part of the funds are used in a single transaction (to prevent someone from paying the same $100 to several payees) and validates ledgers’ consistency. 

    Among its clients, Ripple counts major financial corporations and banks, including Western Union, Santander bank and Canadian Imperial Bank of Commerce. Along with real-time transactions, another aspect that makes Ripple so appealing compared to traditional cross-border transfers is its low fees — about $0.01 per transaction.

    User-friendly UI: Payoneer

    While such companies as Wise and Ripple offer complete alternatives to traditional payment networks, such as SWIFT, other fintech cross-border payment solutions are focused on improving certain aspects of using the existing money transfer solutions. 

    payment flow

    For example, Payoneer is a payment platform for individuals and business that allows users to pay using a credit card, direct deposit or the platform’s account, request payments from marketplaces (iStock, Fiverr and others) and withdraw money in ATMs all over the world using Payoneer Mastercard. In 2020, Payoneer introduced Payoneer for Banks — a program aimed at making cross-border payments easier for traditional financial institutions. Via simple API integration, Payoneer solutions can be seamlessly embedded into an existing payment system, providing a user-friendly and low-cost cross-border payment option for banks, freelancers and marketplaces. 

    business payment screen

    Today, user-friendly UI and UX plays as important a role for individuals as it does for corporate clients. Shortcuts and the ability to quickly multiply payments and financial documents is extremely important for mass payouts to offshore employees, That’s why, for example, when Surf worked on a corporate banking app for Rosbank (part of Société Générale group), our team created a dedicated tab for document management where user can filter their digital documents by date, status, amount and other characteristics, while a ‘repeat’ feature allowed to create invoices from existing templates in just three clicks.

    banking app

    Fraud protection: Rapyd

    The sector of finance is one of the most targeted by cybercriminals. Cross-border payments, where money ‘change multiple hands’ before appearing on the payee’s account, have even more weakspots than a domestic money transfer. Capabilities of ML and AI, in which fintech startups are so proficient, can mitigate cross-border payments’ risk by reinforcing security and preventing fraud.

    London-based Rapyd provides mobile wallets, payments, money transfers and other financial services via API that can be integrated into third-party apps. This allows the company’s clients not only to customize the user experience, but make use of Rapyd’s sophisticated anti-fraud capabilities. AI-powered fraud monitoring tool Rapyd Protect utilizes AI modeling and algorithms to identify high-risk transactions and new fraud trends. Using the rule builder, customers can set up custom rules based on location, types of payment and more. Rapyd’s extensive database includes all currently known high-risk bin numbers and ranges, fraudulent users and IP addresses, while the velocity engine prevents suspicion transactions according to uncommon patterns and purchase frequency.

    Fintech & banks partnership: PayPal and SWIFT gpi

    In the complicated world of global finance, an answer to faster, cheaper and overall better cross-border payments might lie not in the competition between fintech and banks but their collaboration. By partnering advanced digital solutions of a startup with established banking infrastructure, both parties can improve their services and gain an advantage against competitors. 

    Examples of such collaborative efforts include a partnership between PayPal and Citi bank, which allows the bank’s corporate clients to send money via Citi’s WorldLink cross-border payment platform directly to PayPal digital wallets. The partnership effectively unites Citi`s cross-border capabilities with PayPal’s seamless digital experience.

    Another prominent example of how partnerships drive innovations in finance is SWIFT Global Payment Innovation (gpi), an initiative that unites over 250 banks and combines the traditional SWIFT system with a new set of rules that include: transparent fees, end-to-end payment tracking, and confirmation of credit to the payee’s account. Currently, over $100 billion per day are sent via gpi in international payments. 

    Summing things up

    International payments still have lots of challenges for traditional banks, including high costs, long processing time, transparency and security issues. Solutions provided by fintech, from separate payments networks to improvements of the existing solutions, have a huge impact on the cross-border payments industry, making international payments faster, cheaper and more convenient. At the same time, usage of AI and ML provides rich insights on transactions, taking fraud detection to a new level.

    To succeed in the sphere of international payments, banks would have to  maintain competitive rates and speed on transactions. Of course, large established finance players are here to stay (especially to cater to the needs of large international businesses), but without adopting the latest technology or partnering with fintech, they risk losing individual and small-business clients to more progressive finance startups. 

    Having over 11 years of experience developing apps for various businesses, including e-commerce and banks, as well as solutions in AI & ML, Surf always aims to use the latest innovations and provide customizable solutions to its clients. If you have an idea in mind for a project in mobile development or fintech, drop us a line