Future of Cross Border Payments

Introduction:

Cross-border payments are the backbone of global trade, yet they face long-standing challenges such as reliance on intermediaries, high costs, and fragmented systems. Imagine sending money across borders and waiting days to learn where it went or worse, being unclear about how much will arrive. This scenario is all too familiar.

According to the World Bank, over $156 trillion flows across borders annually, with an annual growth rate of 5%, yet the process remains riddled with inefficiencies. In 2023 alone, international payment costs were estimated to reach $120 billion globally due to high fees and friction. According to McKinsey’s Global Payments Report (2023), the cost of handling cross-border transactions stands at an average of 6.5% per payment - an issue ripe for disruption.

But 2024 promises a shift: Cross border payment technologies like SWIFT Go, SWIFT GPI, and Blockchain based solutions like Ripple are poised to redefine the landscape of international payments.

How do these solutions stack up, and what does the future hold?

With over two decades of expertise in the banking and technology sectors, I’ve witnessed firsthand the evolution of payment systems. From early SWIFT messaging to blockchain’s rise, my focus has been on integrating innovative technologies to enhance financial efficiency and transparency.

This article provides a comparative analysis of 3 major players in cross-border payments like SWIFT Go, SWIFT GPI and Ripple. By understanding their strengths, limitations, and future potential, one can better anticipate how these systems will shape the future of global finance.

SWIFT Go: Low-Value Payments (<$10,000)

Launched in 2021, SWIFT Go is designed for low-value international transactions, targeting small businesses and individuals. It offers a cost-effective and fast alternative within the SWIFT ecosystem. As of 2023, industry experts estimate SWIFT Go to have processed transactions worth several billion USD annually, though exact figures are less transparent.

SWIFT GPI (Global Payments Innovation):

SWIFT GPI focuses on enhancing transparency and speed for high-value corporate payments. By 2024, over 85% of SWIFT payments are processed via GPI.

• Transaction Speed: 50% of payments settled within 30 minutes.

• SWIFT GPI facilitates over $400 billion in cross-border payments daily (SWIFT Annual Report 2023).

• This translates to approximately $146 trillion annually.

Ripple: Blockchain for Cross-Border Payments:

Ripple leverages its blockchain protocol and native token, XRP, to streamline cross-border payments. Ripple connects banks and payment providers worldwide.

• Cost: Less than $0.01 per transaction.

• Adoption: Over 300 financial institutions globally, including Santander, MoneyGram and American Express.
• Volume: Ripple processed over $30 billion in transactions by 2023 (Ripple Annual Report). Santander (One Pay FX) estimated $1 billion annually , MoneyGram over $2.4 billion (2019-2021)
• Ripple’s Expansion: Projected to onboard 1,000+ institutions by 2030, increasing market share in emerging economies.

Recent Innovations in Cross-Border Payments

• Interlinking Fast Payment Systems (FPS):

The interlinking of domestic fast payment systems is emerging as a promising solution to enhance cross-border transactions. With over 70 FPS in operation globally, connecting these systems can facilitate near-instantaneous international payments. A critical component for interlinking FPS is the governance and oversight of such arrangements, which is one of the more challenging aspects of cross-border payments. (Source: IMF Connect)

• Mastercard's Move Commercial Payments:

In October 2024, Mastercard introduced "Move Commercial Payments," enabling banks to facilitate near real-time, predictable, and transparent commercial cross-border payments. This innovation operates 24/7, aiming to simplify operations, optimize liquidity, and reduce counter party risk for banks and their customers. (Source: MasterCard)

• Blockchain-Based Payment Systems

Financial institutions are increasingly adopting blockchain technology to enhance cross-border payment efficiency. In November 2024, UBS successfully piloted "UBS Digital Cash," a blockchain-based payment system designed to improve the efficiency of cross-border transactions. This system utilizes smart contracts for automatic settlement, enhancing transparency and reducing settlement times. (Source: Reuters)

• API Advancements and Virtual Account Solutions:

The integration of Application Programming Interfaces (APIs) and virtual account solutions is transforming the cross-border payments landscape. These technologies enhance visibility, transparency, and efficiency in international transactions, enabling businesses to manage liquidity more effectively and streamline payment processes. (Source: JPMorgan Chase)

Conclusion:

The future of cross-border payments is a blend of innovation and adaptation. SWIFT’s modernization efforts address long-standing inefficiencies, while blockchain solutions like Ripple offer groundbreaking alternatives. The competition will likely drive the industry toward faster, cheaper, and more transparent

transactions - a win for businesses and consumers alike.

Disclaimer:

The views presented in this article are my personal opinions and are based on the data that is publicly available as of 2024. It is intended for informational purposes only and does not constitute financial advice. Readers are encouraged to consult professional advisors and verify all data before making decisions.