How Identity Fixes Cross-Border Payment Challenges

Money has never flowed more freely — except across borders, where payments stay slow, costly and stubbornly manual. The fix isn't faster rails. It's better identity.

We live in a time of great convenience, where payments happen instantly. Where you can either swipe or tap your card. Where you can leave the card at home and use your phone or smartwatch. Move money quickly between different banks in thirty minutes or less. Pay someone through their phone number, and they can withdraw the cash with just a PIN code at a nearby ATM.

Money has never flowed more freely than it does today — even for cross-border payments. Moving money between sovereign countries is becoming easier, but it's complex and often an expensive exercise, especially compared to the rapid and cheap options available inside a country.

Never before has faster cross-border payment been as important as it is today. Customers are losing patience with the convoluted processes, especially when they see how fintechs and payment startups can deliver such payments faster and cheaper. It's also a competitive advantage to improve them: the cross-border payments market topped nearly US$156 trillion in 2022 (Statista). The Bank of England estimates that the cross-border payment market will reach US$250 trillion by 2027.

What's fuelling this growth? A globalised economy means we do business wider and farther than ever before. Customers, employees, partners and contractors engage with us from across the world.

Why cross-border payments lag behind

People and businesses have gone global. It's time cross-border payments did the same — so why haven't they? There are three underlying challenges.

Checks and balances

Cross-border transactions are subject to many financial regulations, with particular emphasis on anti-money laundering, fraud screening, sanction checks and various bespoke processes at individual banks. These are onerous and time-consuming, but necessary for risk and compliance reasons.

Intermediaries

Cross-border payments pass through multiple intermediaries before reaching their final destination. These groups apply their respective checks and balances, often repeating what already happened upstream. This is necessary for them to remain compliant, but it significantly increases the time and cost of payments.

Legacy

Old technology and manual processes are still very prevalent in cross-border payments, and the market remains stubbornly manual due to the extensive checks and different stakeholders with incompatible processes. Many cross-border transactions are not digitised and still rely on paperwork. Even electronic standards, such as SWIFT MT103, don't transmit enough data for richer transactions.

There are other issues, such as transaction costs and insufficient visibility. But those are often symptoms of the three challenges above: too many people trying to meet identity-related compliance while using outdated systems.

Speeding up payments with identity

Identity can fix these issues — in fact, it's surprisingly straightforward.

Identity tells us who a person is. It's the crux of the processes above: if banks could move money without worrying about who receives it, cross-border money could flow unhindered. But that is absurd; at the very least, a bank must ensure the right person gets their money. And the risks of fraud and crime are too significant to ignore or leave to other parties.

The fundamental problem with identity is its incompleteness. Payments often take longer because of missing customer details, or are rejected because a customer shares a name with a known criminal or flagged individual. Yet a unified and informed identity process removes such issues, because it can automatically query many different identity markers and extend those capabilities to different stakeholders.

Integrated identity platforms

Cross-border payments are not slow by design. They simply lacked an effective answer to that identity proposition. Integrated identity platforms (IIPs) are changing this. These platforms specialise in checking identities through layers of automation and artificially intelligent technologies. Packaged into platforms, they can be readily integrated into existing business systems and scaled to let different authorised parties use them.

Even if we don't remove any intermediaries in a payment-approval chain, imagine how much faster they would be if they all used the same platform. The processes are natively digital, and most checks and balances happen automatically as the IIP crosschecks hundreds of local and global identity databases. They power concepts such as reusable identity, a new paradigm where a person can use one identity across multiple transactions and businesses.

Integrated identity speeds up compliance checks, reduces risk and removes friction for customers. Notably, the best IIPs have self-service tools that offer customers control of their information. They also ensure that companies can hold onto customers and their information, not ceding anything to competitors.

The Committee on Payments and Market Infrastructures once noted that cross-border payments "do involve more risks, complexities and rules" than domestic ones, but "the difference can often feel disproportionate."

Customers and employees are noticing the difference. They want speed, convenience and due diligence wrapped into one. They want to track payment movements and not pay a fortune to move money from country A to country B.

Identity managed through integrated identity platforms such as Contactable creates those opportunities. Cross-border payments don't need to be the slowpokes of the modern financial world — the right identity brings them up to speed.