Challenges of cross-border payments

Challenges of cross-border payments

Challenges of cross-border payments

Jun 1, 2023

I had to send money to a vendor in another country last month. To do this, I submitted the international wire transfer transaction to my bank through their website. To my astonishment, a representative contacted me the day after to double-check the exchange rate over the phone and confirm the legal disclosures and their transfer fees. The exchange rate they provided was significantly lower than the current real-time rates. After providing my verbal confirmation, the funds, along with the costs, were deducted from my bank account a few minutes later. The manual process in today's era was shocking.

Unfortunately, the vendor did not receive the payment even after a week, and they sent me several messages expressing their concern. They were starting to lose trust in me due to the delay. It took ten days for the funds to finally arrive, and during this process, we had no idea where the funds were.

I have experienced other situations where undisclosed exchange rates, expenses, and charges have resulted in the recipient receiving less than expected.

Sending money across borders involves transferring funds from one country to another, with one party being the sender and the other being the receiver. The sender and the receiver could be individuals or businesses, and the money is typically exchanged in a foreign currency. Unfortunately, the process can be challenging due to outdated legacy payment platforms.

Common cross-border payment use cases

Money sent by migrant workers to support their families

It is common for migrant workers to send money to their families as a means of support. These individuals live and work in foreign countries to secure higher-paying jobs, working diligently to provide for their loved ones. In many low-income nations, these remittances play a significant role in driving the country's GDP.

Here are the remittance in-flow statistics for 2021:

  • South Asia: Increased to $USD 157 billion

  • Latin America and the Caribbean: Increased to $USD 131 billion

  • Europe and Central Asia: Increased to $74 billion

  • Sub-Saharan Africa: Increased to $49 billion

Salary or payments to global employees and vendors

Companies operating internationally or hiring employees and contractors from other countries are responsible for ensuring the timely payment of wages to their staff and vendors.

Global ECommerce

Numerous small to medium-sized enterprises use global e-commerce platforms to sell their products. Despite the currency their clients use to pay for the item, they require the funds settled in their local currency. These businesses strive to offer high-quality products and convenience to their online shoppers. To keep their operations running smoothly, they require funds to be settled in their local currency with minimal fees.

Cross-border donations

During times of disaster and emergencies, global non-profit organizations must be able to provide aid quickly without worrying about fees and financial losses. We understand the importance of such efforts and are committed to helping these organizations in any way we can.

Current obstacles facing cross-border payments

Cross-border payments can become complicated due to the involvement of intermediaries like correspondent banks. The process becomes even more complex for less common currency pairs as more intermediaries are involved.


The vendor received my international wire payment after ten days, which was frustrating and lengthy. This delay can be worrying for many individuals.


When making a transaction, it's common for multiple intermediaries to charge fees. When converting currency, these middlemen usually add a commission or markup percentage to the currency exchange rate, which can result in higher costs. Unfortunately, these fees and commissions often get deducted from the recipient's final amount.

Here are some global average costs for sending money from these countries from Q3 2022, according to the World Bank:

  • South Africa: 15.01 percent.

  • Brazil: 9.01 percent.

  • Japan: 7.82 percent.

  • Germany: 7.02 percent.

Sub-Saharan Africa remains the most expensive region to send money to, recorded at 8.46 percent total average cost. Banks remain the most expensive service provider, with an average cost of 11.69 percent. One should consider the impact of remittance on the GDP of many countries. It involves the income of hardworking migrant workers and small businesses. Hence, the cost of remittance must remain reasonable and fair.

Transparency Issues

In my example, confirming that the payment I sent to the vendor had safely been deposited into their account took ten days. Unfortunately, there was no way to receive updates during the process.

It can be challenging to anticipate currency exchange rates when a transaction goes through several intermediaries, and there is uncertainty about when the funds will arrive. Older platforms present issues of being disconnected, making it challenging to calculate intermediary fees throughout the value chain, and exchange rates can be unpredictable and volatile. The absence of data on charges and commissions can result in high user financial costs and a lack of transparency. 

Lack Of Financial Inclusion

Did you know that The Global Findex 2021 shows that around 1.4 billion adults worldwide still do not have a bank account? 

In many developing economies, a significant challenge individuals face is the need for more access to formal financial services. This is especially true for the 740 million unbanked individuals, who comprise 54 percent of the population in just seven economies. Unfortunately, this gap disproportionately affects women, poor adults, and individuals with lower education levels. 

To address this issue, it is crucial to establish a comprehensive infrastructure that supports a range of financial services. However, once such infrastructure is in place, providing simple cash pickup and mobile wallet payment options can be an effective way to help unbanked individuals manage their finances. Expanding access to financial services can help empower these individuals and promote more inclusive economic growth.

Opportunities For Improvement

The reliance on outdated payment platforms that use manual procedures, a network of correspondents, and centralized processes has resulted in numerous cyber breaches, payment delays, increased costs, and unreliable tracking. This poses a significant challenge for migrants who support their families, small business owners, and individuals residing in lower-income countries. Unfortunately, many people still lack access to these financial services. 

It's imperative to take a step back and assess how international transactions are managed. It's essential to have accessible payment platforms that offer faster, cheaper, and more transparent payments to ensure financial inclusion for everyone. The cost should be transparent and below one percent, with payments processed in minutes, if not seconds. 

We can promote economic growth, international trade, global development, and financial inclusion by implementing an enhanced cross-border payment system.

About Instarails

Instarails, an instant global blockchain payment company, aims to make international payments instant, inexpensive, and inclusive to all. The team is committed to enhancing the global economy, empowering immigrants from low and middle-income countries, and promoting financial inclusion.