Cross Border Payments' Last Mile Problem

Cross-border transactions have become faster than ever, with Swift reporting that 90% of payments reach the destination bank within an hour, surpassing the G20’s goal of 75% by 2027. But the journey doesn’t always end there.

A significant bottleneck persists between the funds arriving at a destination bank and being credited to the end customer. This final step, or “Last Mile,” remains impacted by a range of domestic factors, including regulatory constraints and banking infrastructure limitations, which prevent a seamless end-to-end experience.

The Causes Behind the Gap

1. Regulatory Hurdles: Each country’s regulatory framework affects how quickly payments can reach customers. Countries with strict Anti-Money Laundering (AML) or capital controls may require additional verification steps. Swift data shows that countries meeting the G20 speed targets often have fewer restrictions on incoming payments and 24/7 real-time banking systems​.
2. Domestic Infrastructure Constraints: In countries without continuous real-time payment systems, transaction times can vary widely. Swift has highlighted that nations with fully operational real-time infrastructure generally experience faster customer settlement times. Conversely, banks in markets with limited operating hours or manual processes face difficulties in reaching the one-hour customer credit goal.
3. Market Practices and Customer Verifications: Some regions adhere to practices like confirming with customers before crediting their accounts. These checks, while increasing security, can delay final settlement times. Thierry Chilosi, Chief Business Officer at Swift, notes that to achieve the G20’s goals, industry and regulatory efforts need to prioritize this last leg, addressing local practices to ensure a more seamless experience for customers globally​

The Economic Case

The “Last Mile” delay in cross-border payments has real consequences for both individuals and businesses. Faster transactions could help global commerce thrive, supporting industries like e-commerce and supply chain management, where instant access to funds is increasingly necessary.

In high-volume transactions, such as those involving gig economy workers or international freelancers, delays can impact daily operations. Improved payment speeds would also enhance liquidity management for corporate treasuries and boost economic confidence among international trade partners.

Bridging the Last Mile

Swift has made strides in tackling these cross-border friction points. Tools like Swift GPI (Global Payments Innovation) and Payment Pre-validation have helped reduce bottlenecks at the initial stages of transactions by providing more transparent and predictable payment processes.

Swift GPI has arguably redefined cross-border payments by improving tracking and visibility for each transaction. Through a unique end-to-end transaction reference, both sending and receiving banks can monitor the transaction in real-time, enhancing predictability and providing status updates along the payment journey. This transparency allows banks to identify and resolve any issues early in the payment chain, significantly reducing friction and leading to faster, more reliable transfers

Additionally, the ongoing adoption of ISO 20022 is expected to streamline data formats, allowing for smoother processing and reducing final-mile delays in cross-border transactions​. This standard allows for a richer, more structured data format, facilitating smoother data transmission and enabling automation, which is crucial for processing large volumes of cross-border payments efficiently. By minimizing data errors and supporting straight-through processing, ISO 20022 plays a significant role in reducing delays, especially in the final stages of payment​

Swift’s data reflects noticeable improvements in transaction speeds across several regions. In the Eurozone, for example, 92% of payments now reach customer accounts within an hour, up by 3% over the past year. Similar trends are evident in the Middle East and Africa, where payment speeds have improved by nearly 2%. These improvements demonstrate how regional infrastructure and policy enhancements can positively impact the global payment ecosystem​

A Roadmap to Truly Instant Cross-Border Payments

While Swift’s advancements illustrate what’s possible with global collaboration, the real challenge lies in achieving harmonization across diverse regulatory landscapes. Chilosi underscores the importance of focusing efforts on local processing limitations, as industry-wide standardization will be essential for global consistency.

By addressing these final-mile issues, Swift and its network aim to create a payment experience where cross-border transactions are not just fast but instant, bridging the last mile and fulfilling the G20’s vision.