What Are Cross-Border Payment Problems?

Cross-border payments lie at the heart of international commerce, remittances, and freelancing, but they are arguably the most broken part of the system.

Let’s dissect the layers of inefficiency and their human impact.

1. Multiple Bank Hops

When sending money internationally, a transaction often passes through 2 to 4 banks:

• Originating bank

• One or more correspondent banks

• Destination bank

Each step adds latency, cost, and complexity.

2. Correspondent Bank Fees

These banks charge correspondent fees for handling funds. They often lack transparent fee structures, and charges may be deducted from the final amount, leaving recipients with less than expected.

In high-volume corridors like the US to Mexico or the UAE to India, these fees take a significant toll.

3. Delays

Cross-border transfers are rarely instant. Most take 1–5 days, especially if they go through multiple time zones or hit regulatory checkpoints (like holidays or weekends).

Such delays are critical for families relying on time-sensitive remittances or freelancers awaiting payment.

4. Currency Conversion

Cross-border payments involve exchanging one fiat currency for another. This process:

• Relies on centralized forex dealers

• Involves fluctuating rates

• Adds conversion spreads

Even major businesses can’t predict how much they’ll receive after all fees and conversions are deducted.

5. Regulatory Bottlenecks (AML/KYC)

To comply with Anti-Money Laundering (AML) and Know Your Customer (KYC) laws, banks impose checks that slow transactions further. In some countries, these checks can freeze transactions for days or reject them entirely.

6. Impact on Users

• Migrant Workers: Send money home to families who depend on every dollar.

• Freelancers: Wait days or lose income to fees.

• SMEs: Face high costs in settling international vendor payments.

• Developing Nations: Suffer from delayed inflows, liquidity gaps, and fewer cross-border service options.

These problems are not just financial—they're human, and they demand a scalable, modern solution.