Cross‑border payments allow money to move between accounts held in different countries, enabling businesses and individuals to trade, pay, receive, and operate on a global scale.
According to FXC Intelligence, the global cross‑border payments market was worth more than $194 trillion in 2024 and is forecasted to reach $320 trillion by 2032. This growing scale means it's never been more important to understand how these payments work – and the challenges and opportunities they create.
This expert guide breaks down the types of cross‑border payments, how value moves through the global banking system, and the benefits and risks businesses should understand before transacting across borders.
Key points
Cross‑border payments involve money moving between accounts held in different countries.
These payments fall into two main categories: wholesale transactions between large institutions and retail transactions between businesses and consumers.
Cross-border payments don't physically move money overseas; instead, banks transfer value by crediting and debiting reciprocal accounts.
When banks lack a direct relationship, correspondent banks act as intermediaries to complete cross‑border transfers.
Having more intermediaries in the chain increases processing time, FX costs, compliance steps, and operational delays.
What are cross-border payments?
Cross-border payments refer to transactions where money moves between different countries, typically involving multiple currencies. These payments can be between individual consumers, businesses, or both.
Cross-border transactions usually occur when financial accounts are registered in different countries. For example, if a Nigerian business purchases goods from a supplier based in South Africa and pays from a South African bank account, it wouldn't be considered a cross-border transaction, as both the payment and receiving accounts are within the same country.
However, if the payment is made from a Nigerian bank account – or any account outside South Africa – it becomes a true cross-border transaction. In this case, managing the exchange of Nigerian Naira (NGN) or South African Rand (ZAR) into the other currency can be costly and time-consuming without the right solution.
What are the different types of cross-border payments?
There are two main types of cross-border payments: wholesale and retail.
Wholesale cross-border payments
Wholesale cross‑border payments occur between financial institutions and large organisations. These payments support:
A bank's own cross‑border activities, such as borrowing, lending, foreign exchange, and trading in equity, debt, derivatives, commodities, and securities.
Large‑value transactions generated by governments or major corporates, often linked to international trade and capital markets, or large goods and services flows.
Wholesale payments typically involve high values and institution‑to‑institution settlement, making them essential to global financial markets.
Retail cross-border payments
Retail cross-border payments are typically between businesses and individuals. They can be further categorised based on the different parties involved in the transaction, as follows:
Business-to-Business (B2B) – The most common type of cross-border payment, B2B transactions involve commercial exchanges between companies.
Business-to-Consumer (B2C) – B2C payments include transactions where businesses pay consumers, such as employee payroll or interest payments.
Consumer-to-Business (C2B) – This category covers payments made by consumers to businesses, such as international eCommerce purchases.
Consumer-to-Consumer (C2C) - Though less common, C2C payments occur when consumers send money to other consumers, typically through peer-to-peer services.
How do cross-border payments work?
Money doesn't move physically across borders
Domestic payment systems operate independently, with no direct connection to systems in other countries. As a result, money isn't physically transferred overseas. Instead, value moves through a network of reciprocal accounts maintained by banks and payment providers.
Banks exchange value using reciprocal accounts
International banks hold reciprocal accounts with one another, allowing them to send and receive payments in foreign currencies. Rather than physically moving funds across borders, a bank will credit an account in one country and debit the matching account in another, ensuring the balance of value is maintained.
Other payment providers, including fintech companies and money transfer services, leverage this interbank network to facilitate payments for businesses and individuals worldwide.
Some payments depend on correspondent banks
Not all banks maintain direct relationships with every other bank, particularly when dealing with less common currencies or jurisdictions. In these cases, banks rely on a correspondent bank – an institution that holds accounts for both parties involved in the transaction. This process, known as correspondent banking, is a key mechanism enabling global cross-border payments.
Intermediaries slow down payments and increase costs
For major currency pairs with high liquidity, such as USD ⇄ GBP, the payment chain is typically short. However, when dealing with less common currency pairs, the chain lengthens as more correspondent banks are needed.
Each additional intermediary increases:
Processing time
Fees
Foreign exchange charges
Compliance checks
Operational steps across multiple domestic payment systems
"The route a payment takes between two countries is referred to as a payment corridor. Corridors with lower transaction volumes naturally rely on more intermediaries, resulting in slower settlements and higher costs. Without a streamlined cross-border payment solution, businesses face delays and rising expenses that can hamper efficiency," says Verto Head of Product Tomasz Bilakiewicz.
What are the benefits of cross-border payments?
Cross-border payments empower your business to expand into international markets, opening up new opportunities with customers, partners and suppliers around the world.
By facilitating cross-border payments, businesses can diversify their customer and supplier bases, reducing reliance on domestic markets. This flexibility helps mitigate risks and positions your company for sustainable growth, no matter where you operate.
In addition, businesses that offer international transaction capabilities are often perceived as more reliable, established, and trustworthy. This enhanced credibility fosters stronger relationships with customers and partners, driving brand loyalty and long-term success.
What are the potential drawbacks of cross-border payments?
Navigating different countries' rules and compliance requirements can be time-consuming and challenging, especially when dealing with multiple jurisdictions.
Currency-conversion fees and transaction costs can make cross-border payments significantly more expensive compared to domestic transfers.
Variations in banking systems, time zones and verification processes can lead to delays, slowing down payment settlements.
Exchange-rate fluctuations can impact payment values, making it essential to implement effective risk management strategies.
Cross-border payments are vulnerable to fraud, cyber-attacks, and payment scams, posing potential threats to transaction integrity.
Use Verto for seamless cross-border payments
At Verto, we empower businesses to navigate the complexities of cross-border payments by offering secure, fast, and cost-efficient solutions. Our platform gives you access to instant local accounts in 50+ countries, eliminating the need for cumbersome correspondent banks and payment corridors.
With Verto, you can easily accept payments in native currencies and convert at interbank rates, resulting in 30% faster transaction processing and 40% lower fees, boosting your efficiency and profitability.
Our platform is fully licensed and certified to meet the highest industry standards, so you can trust us to handle your payments with peace of mind. Businesses across the world rely on Verto to process more than 10 billion cross-border payments per year.
Ready to accelerate your business's growth with Verto? Simply sign up today.
For additional insights on cross-border payments and international business, feel free to visit our blog.
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