In an era of rapid digital transformation and financial innovation, cross-border payments have never been more essential - yet they remain inherently complex. This complexity stems from the multi-layered nature of these transactions, involving numerous intermediaries, regulatory frameworks, and outdated infrastructures. Consequently, cross-border payments are defined by what we call the ‘cross-border trifecta’ — three fundamental pillars that define their efficiency: cost, speed, and transparency.
In our latest article, we examined the key challenges impacting each of these pillars and provided an overview of the current market landscape. Now, we shift our focus to the opportunities, sharing our perspective on the technologies we believe are the most effective for financial institutions and payment providers to leverage in overcoming these challenges, enhancing cost efficiency, accelerating transaction speed, and improving transparency in cross-border payments.
Real-Time Payments
As of 2023, 80 countries had implemented or were in the process of launching real-time payment (RTP) infrastructure, reflecting the growing global demand for instant transactions. This shift extends beyond domestic payments and is now an international expectation. A Citi Treasury survey reinforces this trend, identifying 24/7 operations as the most critical technology for addressing cross-border payment challenges over the next five years.
The adoption of RTP is accelerating, with total transaction value projected to grow 289% between 2023 and 2030, it can complete transactions within seconds, eliminating multi-day settlement timelines. Global initiatives such as ISO 20022 and Project Nexus are enhancing interoperability between domestic and international payment networks, ensuring transaction traceability and mitigating risks such as fraud and disputes.
A key advantage of RTPs is 24/7 availability—every day of the year. Unlike traditional methods restricted by banking hours, RTPs enable businesses to send and receive money at any time. This is especially valuable for cross-border payments involving foreign exchange, where local real-time bank transfer schemes, such as Instant SEPA in Europe, allow seamless transactions.
The implementation of real-time payments in cross-border transactions is gaining momentum, primarily driven by its familiarity, as many countries have already adopted it at the local level. One example is India’s Unified Payments Interface (UPI), an instant payment system operating via an open-source API on top of the Immediate Payment Service. UPI’s expansion includes integration with Singapore’s PayNow, enabling seamless cross-border transactions since 2023. Additionally, UPI has extended into Nepal and Bhutan and is forming partnerships across Asia to facilitate instant payments internationally. These efforts aim to simplify global transactions, making them more efficient and cost-effective.
From a Latin American perspective, countries are at different stages in the development of instant payment networks. Some, like Brazil with Pix, Mexico with SPEI, and Argentina with Transferencias 3.0, are leading the way, while others, such as Colombia with Transfiya, Peru with Yape and Plin, and Chile with CPBV, are still in earlier phases. Additionally, several countries are in the process of developing their own systems. Given this widespread familiarity and ongoing investment in instant payment infrastructure, the advancement of technology is making instantaneity a commodity. With this foundation and the continuous evolution of these systems, we believe that seamless cross-border payments are the natural next step for the market.
Digital Currencies - Stablecoins and CBDCs
Blockchain-based digital currencies are redefining cross-border payments, offering faster, more cost-effective, and transparent alternatives to traditional banking. By leveraging immutability, traceability, and programmability, these currencies enable a more efficient payment infrastructure. Asset tokenization and smart contracts further enhance automated, secure, and seamless transactions across borders.
Stablecoins, pegged to fiat currencies or other stable assets, enable instant, low-cost transfers across borders. Unlike traditional payment rails, stablecoins settle transactions in real time, bypassing intermediaries and reducing currency conversion fees. This model combines the accessibility, speed, and transparency of blockchain with the stability of major fiat currencies. Global businesses such as Visa, Mastercard, Worldpay, J.P. Morgan, Citi, DBS Bank, SAP, and PayPal are increasingly leveraging stablecoins as alternatives for payment and settlement methods. Industry analysts consider them the next frontier in cross-border payments, with incumbents exploring them to stay competitive.
For example, in November 2024, Bradesco partnered with Parfin to explore stablecoins for cross-border payments. This initiative aims to revolutionize remittances, reducing costs and settlement times. The partnership allows exporters to settle transactions using U.S. dollar-pegged stablecoins, benefiting from reduced costs and enhanced operational agility. To illustrate, sending $200 from the U.S. to Colombia via traditional channels costs US$ 12.13, while the same transaction using stablecoins can cost less than US$ 0.01 in low-fee networks such as Solana or Ethereum L2s. Unlike SWIFT payments which can take days, stablecoin transactions settle securely and privately within minutes.
Another application for stablecoins is in remittances. Félix Pago, for instance, adopted USDC for cross-border transfers, integrating with Circle Min and Stellar for blockchain infrastructure and Bitso for currency conversion. This model reduced fees by 40%, accelerated transactions, and improved customer experience.
Meanwhile, CBDCs can emerge, in the long term, as a sovereign-backed alternative for cross-border payments. The G20 has identified them as a tool to enhance cost efficiency, speed, and regulatory alignment in international transactions. Over 100 countries are exploring CBDC implementations, attracted by the potential for direct settlements between central banks, eliminating intermediaries, and reducing costs.
Examples like Brazil’s DREX pilot and the Sand Dollar in the Bahamas demonstrate how CBDCs can improve cross-border payment efficiency by enabling real-time clearing, enhancing liquidity, and reducing settlement risks. Additionally, initiatives such as SWIFT's blockchain interoperability experiments aim to connect multiple CBDCs and tokenized assets across diverse networks. This integration could unlock faster, more secure cross-border settlements by ensuring interoperability between blockchain platforms.
Widespread CBDC adoption in cross-border payments remains distant due to regulatory coordination and interoperability challenges. Unlike stablecoins, which are already in use, CBDCs require complex development and international alignment, with few central banks committing to firm design choices. Meanwhile, stablecoins have emerged as a practical and scalable solution, offering near-instant settlement, reduced transaction costs, and the ability to bypass traditional banking infrastructure. As their adoption grows and regulatory discussions evolve, stablecoins are positioned as "the next big thing" in cross-border payments, driving significant transformation long before CBDCs achieve widespread implementation.
Regulatory and Security Challenges
The integration of technology into cross-border payments has the potential to address critical infrastructural challenges. However, the inherent complexity of these transactions - stemming from the involvement of multiple currencies, financial institutions, a multifaceted regulatory landscape, and security concerns - has hindered the widespread adoption of emerging technologies in the sector.
One of the primary constraints lies in regulatory fragmentation. The landscape of cross-border payments spans multiple jurisdictions, each with its own compliance requirements, anti-money laundering regulations, and capital control measures. Even as digital solutions promise frictionless transactions, regulatory mismatches create barriers that technology cannot easily overcome. A prime example is the disparity in how stablecoins and CBDCs are regulated across different countries, which affects their integration into cross-border flows.
Additionally, the complexity of cross-border transactions increases risks such as fraud, data breaches, money laundering, and regulatory non-compliance. Multiple stakeholders, each governed by different rules, make ensuring security and compliance a challenge. Mitigating these threats is crucial to maintaining transaction integrity while allowing organizations to navigate regulations effectively. Interoperability challenges further complicate the landscape, legacy infrastructures and closed financial systems impede full integration. Without harmonization, even the most advanced technologies struggle to deliver seamless global transactions.
Final Thoughts
Technology is undeniably reshaping the cross-border payments landscape, addressing long-standing inefficiencies through real-time payments, stablecoins, and central bank digital currencies. These innovations promise to reduce costs, accelerate settlement times, and enhance transaction transparency. However, while the potential for transformation is immense, structural and regulatory barriers remain significant hurdles to widespread adoption.
Ultimately, success in this space will depend on the strategic alignment between incumbents and innovators. Fintechs and blockchain-based solutions bring agility and efficiency, while established financial institutions provide regulatory expertise and infrastructure. The most impactful breakthroughs will emerge from collaborative efforts that bridge these two worlds, enabling scalable, compliant, and frictionless cross-border payments.
Yet, the greatest challenge is not the technology itself but the ability to establish global regulatory frameworks that ensure compliance while fostering innovation. Governments, financial institutions, and technology providers must work together to create policies that enhance security, improve interoperability, and drive financial inclusion. The next decade will be decisive in determining whether the barriers of cost, speed, and transparency can finally be dismantled, unlocking a truly seamless and efficient global payment ecosystem. The winners in this transformation will not just be those who build the best technology, but those who master its integration within an evolving regulatory and financial landscape.
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