Banks-fintech collaboration a must for accelerating cross-border payments

In 2024, significant progress was made towards establishing a strong infrastructural foundation to support the faster execution of cross-border payments, by harmonising standards, extending operating hours, and harnessing technologies such as blockchain and fast payment systems (FPS).

The challenge in the new year will be to accelerate large-scale innovation and deliver solutions to fuel the next phase of growth. This will require all stakeholders – commercial banks and fintechs, central banks, and regulators – to come together to strengthen existing collaborations and strike new partnerships.

The journey to faster and round-the-clock payments

In these turbulent times, agility in cash management is more vital than ever to corporations operating in Asia. This can be delivered by faster, 24/7 and cost-effective cross-border payments supported by advancing innovations in instant payments, identity verification, security and fraud prevention.

Real-time payment systems are now available in over 100 countries with Hong Kong’s FPS (Faster Payment System) and Australia’s New Payment Platform being examples of real-time cross-border payment systems that successfully combine consumer and business capabilities.

Adoption will continue to grow as more countries connect domestic schemes to pan-national infrastructure like ASEAN’s cross-border payments network. Additionally, more domestic clearings are now 24/7, countries are accommodating non-banks in real-time payment schemes, and service level agreements are making real-time payments a preferred final settlement leg to expedite cross-border payments.

Challenges lie ahead

A global payment infrastructure needs to be a network of networks whose ubiquity means that a company can, with a single connection, obtain worldwide reach and connectivity to the underlying global banking infrastructure. It also needs to function as a single framework and clearing system that can enable real-time payments for the thousands of institutions operating in the global trade ecosystem.

The scale of the challenge is highlighted by the Swift network’s experience. Swift has maintained its dominance in cross-border payments, with 90% of payments sent through the network reaching recipient banks within an hour. But not all markets enjoy this benefit uniformly, as factors like local regulatory compliance and stringent verification requirements against fraud and money laundering add to processing times.

The infrastructure also needs to evolve to safeguard against cyber-criminals and money launderers who are increasingly exploiting instant cross-border transactions weakened by a complex and fragmented ecosystem lacking a single governing body or security policy.

Collaboration as a catalyst

These challenges can be addressed by harnessing technologies through collaborations involving central and commercial banks, and providers of market infrastructure, including artificial intelligence and blockchain, whose interoperability can better facilitate transactions between traditional bank accounts and digital currency accounts.

Banks have partnered with technology providers to offer blockchain-based, real-time cross-border payment solutions. Swift, on the other hand, is expanding partnerships with fintechs, which are, in turn, stepping up collaborations with incumbent banks to address shortcomings in cross-border transactions.

What the future may look like

Cross-border payments are expected to grow, driven by e-commerce and B2B (business-to-business) payments. However, as efforts to implement a single global payment system and uniform regulations face challenges, it is imperative for all stakeholders to come together and devise solutions that can better connect diverse payment infrastructures to support growth.

While collaborative efforts – fueled by growing calls from regulators – are already underway, more needs to be done. Particularly through partnerships that successfully break down silos to exploit the technologies and create a cost-effective, compliant and secured network. We expect 2025 to see major steps taken in these directions and drive the real-time cross-border payments agenda to the next level.

Winnie Chen is the Asia Pacific head of global payments solutions at Bank of America, one of the world's largest financial institutions, offering comprehensive financial services.