Coss-border payments: Types, costs, and challenges
- What are cross-border payments?
- Cross-border payments: Key components
- Types of cross-border payments
- How cross-border payments work
- Cross-border payment costs and fees
- Cross-border payments: 4 key challenges
- Modernization and trends in cross-border payments
- Cross-payments best practices
- How Ramp makes cross-border payments work for your business
Cross-border payments are financial transactions where the payer and recipient are located in different countries, requiring funds to move across currencies, banking systems, and regulatory frameworks. These international payments are projected to grow about 5% annually through 2027, according to JPMorgan’s cross-border payments outlook, as businesses expand global supply chains, payroll, investment activity, and digital services.
For companies operating across borders, payment speed, cost, and transparency directly affect cash flow, supplier relationships, and margins.
What are cross-border payments?
Cross-border payments are transactions where funds move between parties in different countries, often involving multiple banks, currencies, and legal frameworks. They generally fall into two categories:
- Wholesale cross-border payments involve large-value transfers between financial institutions, corporations, or governments, often used for capital markets and treasury operations
- Retail cross-border payments include consumer and small-business transactions such as remittances, online purchases, and freelancer payments
| Category | Typical participants | Common use cases | Transaction size |
|---|---|---|---|
| Wholesale | Banks, corporations, governments | Capital markets, treasury, FDI | High-value |
| Retail | Consumers, small businesses, freelancers | Remittances, e-commerce, contractor pay | Low-to-mid value |
Domestic payments typically settle within one country’s banking system using standardized rails. By contrast, international payments must bridge differences in time zones, currencies, and regulations, which is why international transfers often take longer and cost more, even when the transaction itself is straightforward.
Cross-border payments: Key components
Cross-border payments rely on interconnected systems that determine how funds move, how long settlement takes, and how much the transaction ultimately costs. Currency conversion, regulatory compliance, settlement mechanics, and intermediary banking relationships each influence speed, transparency, and risk.
Currency conversion mechanisms
Currency conversion is central to most cross-border payments. When funds move between currencies, financial institutions and payment providers apply exchange rates that may include markups. These rates can fluctuate between payment initiation and settlement, creating foreign exchange (FX) risk. Managing that risk is critical for businesses with recurring international payments.
Regulatory compliance requirements
Regulatory compliance, such as International Financial Reporting Standards, is another foundational component. Cross-border payments must comply with anti-money laundering, sanctions, and know-your-customer rules across multiple jurisdictions. Common compliance requirements include:
- Customer identity verification, which ensures all parties are properly identified before funds move
- Sanctions screening, which checks transactions against government-issued restriction lists
- Transaction monitoring, which flags unusual patterns for review
Settlement processes
Settlement processes determine when funds are actually available to the recipient. Settlement may occur on a gross or net basis and can take days depending on the payment rail. Delayed settlement ties up working capital and complicates cash forecasting. Faster settlement is a major driver of modernization efforts.
Intermediary banks and their roles
Intermediary banks play a critical role in traditional cross-border payments. When two banks do not have a direct relationship, correspondent banks route funds between them.
It’s important to distinguish messaging from settlement: networks like SWIFT transmit payment instructions, but the actual transfer of value occurs through correspondent banking relationships where banks hold accounts with one another. Each intermediary may deduct fees and introduce delays, which contributes to limited transparency in traditional international payments.
Types of cross-border payments
Cross-border payments support trade, investment, payroll, and consumer activity across borders. The structure and compliance requirements vary depending on who is sending the funds and why. Most transactions fall into three broad categories.
B2B international payments
Business-to-business (B2B) international payments support global supplier networks and operational expenses. These transactions often involve higher values, contractual obligations, and stricter compliance requirements:
- Supply chain payments: Funds sent to overseas manufacturers and distributors to keep goods moving
- International vendor payments: Payments for services such as software subscriptions, logistics, or consulting
- Cross-border invoicing: Settlement of trade obligations between companies in different countries
Investment and capital flows
Foreign direct investment involves long-term capital commitments in overseas operations, such as building facilities or acquiring companies. These transactions are typically large, highly regulated, and sensitive to settlement timing.
Portfolio investments include cross-border purchases of financial and real assets. Common examples include:
- Equity investments in foreign public companies
- Debt investments through international bond markets
- Property purchases in overseas real estate markets
Dividend and interest payments distribute returns to foreign investors. These recurring transactions must account for withholding taxes and currency conversion, and small inefficiencies can compound over time.
Personal remittances
Personal remittances are retail cross-border payments sent by individuals rather than institutions. Family support transfers fund living expenses, healthcare, and education in another country. Fees and exchange rate markups can materially reduce the amount received.
International freelancer payments support the global gig economy, enabling companies to pay contractors across borders for services such as design, engineering, and content. Cross-border e-commerce purchases occur when consumers buy goods or digital services from foreign merchants, triggering international card payments and currency conversion through digital payment platforms.
How cross-border payments work
Cross-border payments move through a series of coordinated steps involving messaging networks, correspondent banks, and settlement systems. While the user experience may feel simple, multiple institutions often participate behind the scenes before funds reach the recipient.
A typical cross-border payment follows this process:
- The sender initiates the payment through their bank or platform, providing recipient and currency details
- The payment message travels through a messaging network such as SWIFT
- Intermediary banks route the funds until they reach the recipient’s bank
- The recipient’s bank credits the account once settlement is complete
Correspondent banking networks enable this routing by allowing banks to hold accounts with foreign institutions. While effective, this structure introduces potential delays and transaction fees at each hop. Limited visibility into intermediary banks makes tracking and reconciliation more difficult for senders.
Traditional payment methods
Traditional cross-border payments rely on established banking infrastructure. These methods are widely accepted but often slower and more expensive than modern alternatives.
SWIFT wire transfers are the most common method for large international payments. Messages travel over the SWIFT network, while funds move through correspondent banks. Settlement typically takes three to five business days, depending on the number of intermediaries involved.
International ACH transfers provide a lower-cost alternative for certain corridors. They batch payments and settle on scheduled cycles. While cheaper than wires, they are generally slower and may have limited geographic coverage.
Bank drafts and checks are still used in some regions for trade and education payments. These paper-based methods are slow and prone to loss or fraud. Clearing times can extend into weeks.
Modern digital payment methods
Modern payment solutions aim to reduce friction by shortening settlement timelines and improving transparency. These systems often consolidate steps that traditional rails handle separately.
- Digital wallets and payment platforms centralize international payments and often provide upfront visibility into FX rates and fees
- Blockchain-based payment solutions settle transactions in minutes by transferring value directly on distributed ledgers
- Real-time payment networks connect domestic instant-payment systems across borders to reduce processing delays
Cross-border payment costs and fees
Cross-border payments often involve more than one visible fee. In addition to transfer charges, businesses may incur foreign exchange spreads, intermediary deductions, and receiving bank fees. Traditional cross-border transactions can total between 3% and 7% of the payment value once all costs are included.
Hidden costs frequently appear in exchange rate markups embedded within quoted FX rates. For example, a 2% markup on a $100,000 supplier payment results in a $2,000 incremental cost that may not appear as a separate line item. Over time, these inefficiencies can materially affect margins and cash flow forecasting.
Types of fees
Transfer fees are charged by the sending institution for initiating the payment. These fees vary by method and destination. Wires typically carry the highest upfront fees.
Currency exchange markups are applied when converting between currencies. Banks and payment providers often add a spread to the mid-market rate, which is one of the largest cost drivers in international payments.
Intermediary bank charges are deducted by correspondent banks during routing. Common charges include:
- Lifting fees for processing the transfer
- Handling fees for currency conversion
- Service fees for compliance checks
Receiving bank fees are charged when funds arrive. These fees reduce the final credited amount and are sometimes disclosed only after settlement.
Cost comparison by method
Traditional bank wires are generally the most expensive option due to multiple intermediaries and layered fees. Digital payment solutions often consolidate steps, reducing both transfer charges and FX spreads. Volume-based pricing can lower per-transaction costs for frequent senders, but the optimal method depends on urgency, transaction size, and destination corridor.
Businesses can minimize costs by:
- Consolidating payments to reduce transaction volume
- Using transparent FX pricing instead of bundled rates
- Selecting rails optimized for specific corridors
Cross-border payments: 4 key challenges
The Financial Stability Board has identified four persistent challenges in cross-border payments: high costs, slow speed, limited access, and insufficient transparency. These structural issues affect businesses, financial institutions, and individuals sending money across borders. Addressing them requires coordination between regulators, banks, and payment providers.
High costs
Cross-border payments are typically more expensive than domestic transactions. FX markups and intermediary bank charges compound quickly, especially for high-value or recurring payments. Small businesses often feel these costs most acutely, and elevated fees can discourage international expansion.
Slow processing times
Traditional cross-border payments face multiple timing constraints:
- Multi-day settlement cycles
- Time zone differences
- Manual compliance reviews
Bank cut-off times and non-overlapping business hours add further delays. Funds may sit idle over weekends and holidays, complicating cash management and forecasting.
Limited access
Geographic restrictions limit payment options in certain regions. Not all banks maintain correspondent relationships in every market. Banking requirements may include:
- Minimum balances
- Local entity registration
- Extensive documentation
These barriers can exclude smaller firms and individuals from efficient cross-border payment options.
Lack of transparency
Fee disclosure is often incomplete in traditional payment systems. Senders may not know the total cost upfront, particularly when intermediary banks deduct charges during routing. Exchange rate opacity can obscure the true FX spread, and limited tracking visibility makes dispute resolution slower and more complex.
Modernization and trends in cross-border payments
Global efforts to modernize cross-border payments focus on reducing costs, accelerating settlement, expanding access, and improving transparency. Regulators, financial institutions, and fintech providers are redesigning payment rails to address the structural challenges identified by the Financial Stability Board. Technology and data standardization play central roles in these reforms.
Blockchain and cryptocurrency solutions
Blockchain networks operate continuously without traditional banking hours, enabling transactions to settle outside weekday cut-off times. Key advantages include:
- 24/7/365 transaction processing
- Near-instant settlement
- Reduced reliance on correspondent banks
Faster settlement can improve liquidity management, particularly for high-volume businesses. Lower transaction costs and greater transparency make blockchain-based rails attractive for specific corridors and use cases.
Regulatory developments
The G20 has published a roadmap to enhance cross-border payments, focusing on harmonization, interoperability, and innovation. Adoption of ISO 20022 standards improves the quality and consistency of payment data, enabling richer remittance information, stronger compliance screening, and easier reconciliation across institutions. Central bank digital currencies are also under exploration, including:
- Wholesale CBDCs for interbank settlement
- Retail CBDCs for consumer payments
- Cross-border CBDC corridors designed to streamline international transfers
What is the G20?
The G20, or Group of Twenty, is an international forum made up of 19 countries and the European Union. Formed in 1999, it brings together finance ministers and central bank governors to coordinate policy on global economic stability, financial regulation, and international trade, including cross-border payment reform.
Cross-payments best practices
Optimizing cross-border payments requires aligning payment methods with transaction size, frequency, and urgency. Businesses should balance speed, cost, compliance requirements, and corridor reliability when selecting rails. Regular review of payment workflows can uncover hidden fees and reduce operational risk.
Choosing the right payment method
Key decision factors include:
- Transaction size and frequency
- Required settlement speed
- Destination corridor reliability
Not every transaction requires instant settlement. Matching the payment rail to the business objective helps control costs without sacrificing efficiency.
Managing currency risk
Foreign exchange volatility can materially affect margins on international payments. Hedging tools such as forward contracts allow businesses to lock in exchange rates for large or recurring transactions. Multi-currency accounts provide additional flexibility by:
- Holding balances in local currencies
- Reducing conversion frequency
- Improving supplier relationships
How Ramp makes cross-border payments work for your business
Cross-border payments are essential to operating in a global economy, but managing speed, cost, and compliance across multiple countries can quickly become complex. Finance teams need visibility into fees, control over currency options, and reliable settlement timelines to protect margins and maintain strong vendor relationships.
Ramp Bill Pay enables finance teams to send international transfers to vendors in more than 185 countries, with the option to pay in USD or selected local currencies. Built-in workflows and integrations with NetSuite, QuickBooks, Xero, and Sage Intacct help streamline approvals, automate reconciliation, and maintain consistent controls across domestic and international payments.
Evaluate your current cross-border payment strategy and see how Ramp can help you move money more efficiently across borders.
FAQs
Due diligence is the research and evaluation done before engaging a vendor, such as assessing financial health or checking legal standing. Vendor compliance is ongoing. It ensures the vendor continues to meet agreed-upon standards after onboarding.
A vendor compliance checklist should cover tax documents (like W-9s), certificates of insurance, signed vendor contracts, security documentation, regulatory certifications (e.g., SOC 2), and policy acknowledgments. It should also include review dates and responsible team members to ensure follow-through.
A clear compliance process sets expectations early, reducing confusion and disputes down the line. Vendors that understand your standards are more likely to deliver consistently.
“In the public sector, every hour and every dollar belongs to the taxpayer. We can't afford to waste either. Ramp ensures we don't.”
Carly Ching
Finance Specialist, City of Ketchum
“Ramp gives us one structured intake, one set of guardrails, and clean data end‑to‑end— that’s how we save 20 hours/month and buy back days at close.”
David Eckstein
CFO, Vanta
“Ramp is the only vendor that can service all of our employees across the globe in one unified system. They handle multiple currencies seamlessly, integrate with all of our accounting systems, and thanks to their customizable card and policy controls, we're compliant worldwide. ”
Brandon Zell
Chief Accounting Officer, Notion
“When our teams need something, they usually need it right away. The more time we can save doing all those tedious tasks, the more time we can dedicate to supporting our student-athletes.”
Sarah Harris
Secretary, The University of Tennessee Athletics Foundation, Inc.
“Ramp had everything we were looking for, and even things we weren't looking for. The policy aspects, that's something I never even dreamed of that a purchasing card program could handle.”
Doug Volesky
Director of Finance, City of Mount Vernon
“Switching from Brex to Ramp wasn't just a platform swap—it was a strategic upgrade that aligned with our mission to be agile, efficient, and financially savvy.”
Lily Liu
CEO, Piñata
“With Ramp, everything lives in one place. You can click into a vendor and see every transaction, invoice, and contract. That didn't exist in Zip. It's made approvals much faster because decision-makers aren't chasing down information—they have it all at their fingertips.”
Ryan Williams
Manager, Contract and Vendor Management, Advisor360°
“The ability to create flexible parameters, such as allowing bookings up to 25% above market rate, has been really good for us. Plus, having all the information within the same platform is really valuable.”
Caroline Hill
Assistant Controller, Sana Benefits
