Transforming Cross-Border Payments in 2024

In the ever-evolving financial landscape, technological innovation continues to play a pivotal role in advancing traditional banking services. One area experiencing significant transformation is cross-border payments. The integration of cutting-edge solutions is breaking down age-old barriers and revolutionizing the way financial institutions facilitate international transactions.


Demand for Cross-border Payments Is Increasing


Driven by economic, technological, and demographic factors, demand for cross-border payments shows no signs of slowing down.


The expansion of global trade and business activities has led to a sharp increase in cross-border transactions. In fact, B2B cross-border payments represented $39.3 trillion in 2023, and is expected to grow 43% by 2030, reaching more than $56 trillion.


Businesses are operating internationally at an increasing rate, necessitating the movement of funds across borders for trade, investments, and collaborations – and this trend will likely continue. According to a study from leading international bank Standard Chartered, “49% of U.S. companies surveyed saw their best growth opportunities outside of their home region, compared to 35% in June 2020.”


The rise of e-commerce and digital business models has also facilitated cross-border transactions. The global ecommerce market is expected to hit $8.1 trillion by 2026, and “the number of digital buyers worldwide has consistently climbed from 1.32 billion in 2014 to more than 2.64 billion by the end of 2023,” according to Insider Intelligence. These online marketplaces, digital services, and international e-commerce platforms require seamless payment solutions to cater to a global customer base.


Growing international travel and tourism is also contributing to higher cross-border payments. According to the latest data from the World Tourism Organization (UNWTO), “an estimated 975 million tourists traveled internationally between January and September 2023, an increase of 38% compared to the same months of 2022.” For these individuals, being able to make payments in foreign currencies for travel-related expenses, including accommodations, transportation, and entertainment, is needed.


Ongoing global migration contributes to increased cross-border payments through remittances. Individuals working abroad often send money back to their home countries to support family members or contribute to local economies. In fact, migrant workers sent home almost $800 billion in 2022. For some countries, remittances contributed nearly half of their total GDP.


Finally, efforts to enhance financial inclusion on a global scale have led to increased access to banking and payment services. Individuals in regions with limited financial infrastructure now have the ability to engage in cross-border transactions.



Blockchain Technology Streamlines Cross-Border Payments


As demand grows, there is a global need to streamline payments. One of the key contributors to transforming cross-border payments is blockchain technology. Blockchain, the decentralized and secure ledger system, has emerged as a game-changer in cross-border payments. By providing transparency, security, and efficiency, blockchain minimizes the need for intermediaries, reducing transaction costs and processing times.


Banks are increasingly exploring blockchain-based solutions to streamline cross-border payments and enhance overall transaction experiences. There are also significant cost savings. According to a report by Jupiter Research, blockchain will enable banks to save up to $27 billion on cross-border settlements by the end of 2030 - a cost reduction of more than 11%. Ultimately, these cost savings can be passed down to customers, providing them with a more cost-effective way to send money to loved ones in their home countries. 



Real-Time Payments and the Challenges with SWIFT


Traditional cross-border transactions using methods like SWIFT involve lengthy processing times, usually taking two to five business days for funds to be received, not to mention they can be 10x the cost of a domestic transfer. For businesses, processing times can be even longer. According to a Rapyd report in 2023, “38% of respondents experience delays of five days or more when sending or receiving cross-border payments.”


Yet, SWIFT remains the primary method for cross-border payments. It has long been the backbone of global financial transactions, facilitating cross-border payments for decades. While it was incredibly innovative when developed in the 70’s, it has seen little innovation since and continues to face criticism for lagging other financial technology.


In contrast to emerging technologies like blockchain and real-time payment systems, SWIFT's infrastructure is perceived as less agile and more resistant to change. As the financial industry increasingly embraces innovative solutions for faster and more cost-effective cross-border transactions, SWIFT is under pressure to adapt and evolve to meet the evolving needs of the global financial ecosystem.


Initiatives such as SWIFT GPI are improving the speed of cross-border payments, but obstacles remain to shortening domestic payments processing times. Additionally, transaction speeds vary significantly across payment routes.


Ultimately, financial institutions and their customers need better and more consistent solutions for real-time payments.



Using Crypto as a Bridge Currency 


One of the significant issues with SWIFT is friction.


When leaping from one ecosystem to another, there’s tremendous friction to overcome. Standardizing cross-border communications between financial institutions can reduce this friction, helping lower transaction costs and shrinking processing times. One way to do so is to use crypto as a bridge currency.


This is how Almond’s technology works: A transaction starts with a deposit in fiat currency at the sending financial institution. Funds are then transferred across borders as a digital currency through a network of digital currency exchanges. The funds are then transferred back from digital currency to fiat currency at the destination country, and then the last mile to the beneficiary. With seamless fiat-crypto conversions, the speed of settlement is significantly increased, from days to hours.


Additionally, because multiple digital currencies are used, financial institutions can leverage the one with the best current rate to lower costs and ensure customers get the most of their funds. Traditional foreign exchange rates are subject to market fluctuations, and the timing of a cross-border payment can significantly impact the final amount received. Users may experience volatility in exchange rates between the initiation and completion of the transaction. Ultimately, unfavorable FX rates contribute considerably to the overall transaction costs of cross-border payments, and users may find that a substantial portion of the funds sent is absorbed by currency conversion fees, reducing the value of the transaction.



Collaboration with Fintechs


The demand is clear: consumers need cross-border payments but require greater speed, affordability and transparency.  The question becomes, how can banks meet these expectations without adding unnecessary risk? The solution could lie in collaboration.


To enhance cross-border payments, banks should strategically partner with fintech companies to leverage the mutual strengths of both traditional banking and innovative technology. Fintechs bring agility, technological expertise, and creative solutions to the table, addressing user pain points such as high transaction costs, delays, and inefficiencies. Integrating blockchain and real-time payment systems into existing infrastructure is one step in the right direction.


Moreover, such partnerships can streamline compliance processes through automated solutions, ensuring adherence to regulatory requirements. The synergy between banks and fintechs holds tremendous capacity for a more resilient, affordable, and user-centric cross-border payment ecosystem, benefiting both financial institutions and their customers.


About the Author

Adam Swartzbaugh is Co-Founder & CEO of Almond FinTech.

Almond reflects the life experiences, aspirations and global vision of Founder & CEO Adam Swartzbaugh. Adam brings his unique perspective as an accomplished scholar, founder of an admired philanthropic organization, and as a former US Army Special Forces Officer. Adam earned his Bachelor of Arts (B.A.) in International Relations at Brown University. He holds several Masters Degrees, including a Master of Arts (M.A.) from Brown in Development Studies, a Master of Business Administration (M.B.A.) as a Legatum Fellow and Tillman Scholar at the MIT Sloan School of Management, and a Master in Public Administration (M.P.A.) as a Center for Public Leadership Fellow at the Harvard Kennedy School.

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