“The difficulty of international trade lies not in the exchange of goods but in the exchange of currencies.” John Maynard Keynes (1944) – Bretton Woods Conference.

Cross-border payments are essential for global trade, remittances, and financial transactions. For centuries, cross-border payments have been an important part of the development of financial systems and countries (e.g. Bindseil and Pantelopoulos 2022, Bruno et al. 2025, Schenk 2024). Yet, they remain inefficient compared to domestic payments, as documented recently in Lammer et al. (2025). Wholesale cross-border payments are relatively low-cost and fast, but retail cross-border payments and remittances have not seen similar progress as with domestic payments and are still very costly, slow, and less accessible.

These deficiencies have been long recognised (e.g. CPMI 2018), but efforts were boosted in 2020 after the G20 established a programme to enhance the efficiency of cross-border payment arrangements (FSB 2020, CPMI 2020). Considerable progress has been made since, but more needs to be done, as also noted recently by Governors Andrew Bailey of the Bank of England (Bailey 2026) and Fabio Panetta of the Bank of Italy (Panetta 2026).

Research on cross-border payments also remains behind that on domestic payments, particularly on new and possible innovative models. Lessons and recommendations are sorely needed on how national and international efforts can best address barriers and what solutions work for improving cross-border payments. In a recent paper (Claessens and Rice 2026), we explore the evolution of cross-border payments, identify the challenges for the three key segments (retail, remittances, and wholesale payments), review related research and policy work, and draw lessons on how best to enhance cross-border payments and improve their efficiency, including on the balance between public and private sector initiatives.

Evolution and current state of cross-border payments

Like domestic payments, cross-border payments involve front-end (user interfaces) and back-end (infrastructure and processes) systems (Figure 1). While over the past decades, technological innovation has drastically changed the front end of domestic payments, it is making much more measured inroads into the cross-border payments ecosystem. Still, there are some new alternative and innovative arrangements. Recent developments on the front-end like Wise, Revolut, and M-Pesa Global have introduced lower cost and more user-friendly solutions for retail cross-border payments. However, they often still depend on existing infrastructure and remain limited in scale. On the back end, the traditional correspondent banking model, which relies on bilateral relationships between banks, still dominates cross-border payments. Although resilient and integral to wholesale payments, this model is poorly suited for retail payments and remittances due to its high costs, slow processing, and limited transparency. Developments to enhance the back-end infrastructure for cross-border payments efficiency include interlinking fast payment systems (FPS) and centralised hubs like TIPS (EU) and PAPSS (Africa). These rely less on intermediaries and improve interoperability but tend to evolve more slowly and to date have complemented the traditional correspondent banking model, rather than replaced it.

Figure 1 The current state of cross-border payments

Emerging technologies include distributed ledger technology (DLT), decentralised finance (DeFi), stablecoins, and tokenised assets (e.g. Adrian et al. 2025, BIS 2020, 2025). These could enable real-time settlement, automate processes, enhance transparency, and reduce reconciliation efforts. While they offer potential solutions, their effectiveness in improving cross-border payments depends on specific use cases, jurisdictional contexts, and objectives. And unless some key issues are addressed, the potential roles of DeFi and stablecoins in safe and legitimate cross-border payments will be doubtful.

Challenges in cross-border payments

Research and policy lessons to date confirm that technology alone cannot overcome the significant regulatory, governance, and supervisory complexities across borders. Rather, challenges such as regulatory gaps, financial risks, and scalability issues remain, which necessitate public efforts.

• Market failures. Research and policy work common to both domestic and cross-border payments stresses the significant scope for market failures due to their two-sided markets nature — how to effectively cater to both payers and payees — and related network effects. Related challenges include monopolistic behaviour, network effects, and interoperability barriers, which result in inefficiencies, hidden and high costs, and limited access. It has long been recognised that even more than domestic payment systems, cross-border payments are multi-sided markets requiring coordination between not just payers, payees, and intermediaries, but also between authorities (Leibbrandt 2004). Consequently, efficient cross-border payments arrangements tend more often to fail to emerge or, if they do, become uncompetitive.
• Technology alone is not sufficient. Our review confirms that technology alone cannot overcome the significant complexities across borders. Rather, challenges such as regulatory gaps, financial risks, and scalability issues necessitate public efforts. Technology can then build on these efforts.
• Innovation barriers. Domestically, advanced economies are enhancing interoperability and efficiency through real-time gross settlement (RTGS) systems and common standards, while several emerging markets and developing economies have leapfrogged by adopting innovative and cost-effective digital solutions. Establishing cross-border payments arrangements and ensuring their efficient operation is more difficult, however, given the large differences in countries’ institutions, regulations, and governance structures, and the limited presence of public sector mitigants commonly employed domestically. Cross-border payments interoperability thus remains limited and there are risks of ‘walled gardens’.
• Limited public sector involvement. Only public sector interventions have resolved market failures such as limited interoperability domestically. Unlike domestic payments, cross-border payments lack a central authority to promote competition, harmonise standards, and address coordination failures.

Opportunities for cross-border payments

• Wholesale cross-border payments. Modernising legacy systems like Real-Time Gross Settlement provides opportunities to align with international standards, enhance interoperability, and explore innovative technologies like distributed ledger technologies and tokenised assets (e.g. Projects Helvetia, Meridian, and Agorá of the BIS Innovation Hub). However, updating legacy systems remains challenging and innovative projects remain largely in their experimental phases.
• Retail cross-border payments Models like single access and bilateral links (e.g. UPI-PayNow) have improved efficiency and reduced costs, but scaling remains difficult. Interlinking fast payment systems is a promising solution, but requires global standards, application programming interfaces (APIs), and robust risk management. Hub-and-spoke systems (e.g. Project Nexus) and centralised platforms (e.g. TIPS) offer scalable and efficient alternatives but involve much coordination to become operational.
• Remittances. Improving remittances is challenging due to informal users, cash reliance, and lack of identification, but targeted improvements, particularly on the first and last legs, can be made.

We emphasise the need for better data and lessons on the roles of private and public sectors. Granular and higher quality data are required to better assess the costs, speed, access, and efficiency of cross-border payments. Analytical efforts should focus on identifying barriers to effective cross-border payments arrangements and methods to best align systems. Going forward, the private sector will continue to drive innovation, but it must align its systems more with international standards and policies across payment arrangements. Complementarily, the public sector — central banks, other public authorities, international agencies — needs, as a priority, to coordinate standards, technologies, and legal frameworks. Public-private partnerships are crucial for fostering innovation, efficiency, and competitive payment systems. Globally consistent legal frameworks, anti-money laundering (AML)/combating the financing of terrorism (CFT) compliance, and interoperability with traditional systems are critical for effective cross-border payments and preventing regulatory arbitrage. International efforts and recommendations are key, and the G20 cross-border payments programme addresses barriers and proposes solutions for improving cross-border payments. Its frameworks, guidelines, and standards should be implemented in a timely and consistent way reflecting country-specific needs and using public-private actions to scale efficient systems.

Authors’ note: The opinions expressed do not necessarily represent those of the Bank for International Settlements or its Committee on Payments and Market Infrastructures.

References

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BIS (2025), The next-generation monetary and financial system, BIS Annual Economic Report, June.

Bindseil, U and G Pantelopoulos (2022), “Towards the holy grail of cross-border payments”, ECB Working Paper No. 2693.

Bruno, P, O Denecker and G Leibbrandt (2025), “A retrospective: Looking back at ‘A Vision for the Future of Cross-border Payments’”, Journal of Payments Strategy & Systems 19(2): 103–113.

Claessens, S and T Rice (2026), “Cross-border payment technologies: innovations and challenges”, CEPR Discussion Paper 21280.

CPMI – Committee on Payments and Market Infrastructures (2018), “Cross-border retail payments”, CPMI Papers No. 173, Bank for International Settlements, 16 February.

CPMI (2020), “Enhancing cross-border payments: building blocks of a global roadmap”, Stage 2 report to the G20, July.

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