As Cross-Border Payments Splinter, Firms See Interoperability As Way Out

The global payments system is entering a messy middle phase where innovation is abundant, coordination is scarce and geopolitics are reshaping the rules in real-time.

The scale alone underscores the stakes. The global cross-border payments market has reached $238 billion and is projected to grow steadily, while B2B flows are on track to hit $50 trillion by 2032.

Yet beneath that growth lies a system still defined by inefficiencies driven by multiple intermediaries, opaque fees and days-long settlement delays. A new economic bulletin from the European Central Bank (ECB) found that the global provision of correspondent banking services has declined by roughly 20% since the mid-2000s, as banks have exited less profitable or higher-risk corridors.

What is emerging instead is not a single upgraded system, but a patchwork of competing rails that are faster and more digital, but increasingly divergent.

Governments, central banks, FinTech firms and global institutions are all attempting to modernize the infrastructure simultaneously. The result is not emerging as a clean transition from old to new, but as a far more complex outcome: a global payments system potentially being rebuilt in parallel, without a single unifying blueprint.

Read more: Banks Make Their Move in Cross-Border Payments

Innovation Without Convergence

The prevailing narrative around cross-border payments modernization has long centered on disruption and the idea that new technologies such as blockchain, real-time payment rails or digital currencies could displace legacy systems. But the emerging reality is more nuanced. Innovation is abundant, yet convergence is elusive.

After all, payment corridors differ dramatically in volume, infrastructure and institutional capacity. What works for high-volume routes between advanced economies may be economically unviable in smaller or less developed markets. Lower transaction volumes, limited capital access and weaker infrastructure can create structural barriers that no single technological solution may be able to fully overcome.

The United States, Brazil, India and the eurozone, among others, have each developed their own domestic fast-payment infrastructures, tailored to local regulatory environments and market needs. These systems have delivered meaningful improvements within national borders, enabling near-instant settlement and lower costs, but cross-border functionality remains limited.

Linking these systems across jurisdictions can introduce layers of complexity around differing standards, regulatory requirements, liquidity management constraints and foreign exchange considerations.

The Federal Reserve’s proposal to expand the FedNow® Service into cross-border use cases introduces one such approach. The plan would allow U.S. banks to use intermediaries, including correspondent banks, to complete the international portion of a transaction.

Still, geopolitics adds a further layer of complexity. Payments infrastructure has become a strategic asset, tied to questions of sovereignty and economic influence. Countries are increasingly motivated to reduce dependence on foreign-controlled systems and to build or support alternative networks. This dynamic risks reinforcing fragmentation, as competing blocs develop parallel infrastructures rather than integrating existing ones.

See also: How CFOs Are Turning B2B Payments Into a Strategic Weapon

Interoperability as the Central Challenge

If fragmentation is the defining feature of the current moment, interoperability is its central challenge. The ability of different systems to communicate, exchange data and settle transactions efficiently across borders will determine whether modernization efforts ultimately succeed.

After all, despite the surge of innovation, legacy systems remain deeply embedded in the global financial architecture. Networks such as SWIFT continue to play a central role in facilitating cross-border transactions, particularly for high-value payments and institutional flows.

Rather than being displaced, these systems are evolving. Incremental upgrades, enhanced messaging capabilities and integration with newer technologies are extending their relevance. At the same time, they provide a degree of stability and trust that newer entrants have yet to fully replicate.

Central banks, international organizations and regulatory bodies have recognized the need for coordinated action, as evidenced by initiatives led by the G20 and other forums.

These efforts have focused on setting targets for cost, speed, transparency and access, as well as promoting standardization and interoperability. Progress has been made, but it remains uneven. Translating high-level commitments into practical, globally consistent implementation is inherently difficult.

“Globally, broader interoperability must be a key priority,” Emanuela Saccarola, Citi’s head of cross-border payments, services, told PYMNTS in an earlier interview, noting that the race now is to provide access to these systems from a cross-border perspective so that payments providers can connect those domestic systems into a global grid, one that can operate around the clock.

In that sense, the central question is not who will build the next generation of payments infrastructure, but who will connect it.