Cost: Cross-border payment fees vary based on transaction amount, payment method, destination, and exchange rates. Typically, fees range from 0.3-20% of the transaction amount. Complexity or managing multiple currencies can also affect the cost for providers. High costs may also be due to compliance with KYC/AMC guidelines and partnerships. Standardised regulation and advanced technology can decrease these costs and overall transaction costs for customers.

Speed: Domestic real-time payments have been implemented in many nations, yet cross-border payments are often delayed due to extensive checks and regulations. Delays are commonly caused by missing remittance information and anti-money laundering/fraud checks. Financial institutions have various methods to reduce risks. The use of digital tools and standardised information sharing between countries can improve payment processing speed.

Lack of standard regulation: Cross-border payments are subject to regulations from the origin and destination countries, as well as any other jurisdictions they pass through. Each country has its own systems and regulatory authorities to protect consumers and prevent fraud and illegal activities. In India, the Reserve Bank of India regulates and issues guidelines for cross-border payments. 

In Singapore, the Monetary Authority of Singapore oversees cross-border payments. In Europe, the Single Euro Payments Area system and other legislation like the Payment Services Directive 2 are used. 

Banks also have specific regulatory and compliance requirements for Anti-Money Laundering and Know Your Customer regulations, which can increase the cost of setting up the process. Standardising AML and KYC processes can create a level playing field.

Message format: Standardisation and interoperability are crucial for enhancing the effectiveness and growth of cross-border retail payments. The majority of cross-border payments are processed using the SWIFT MT103 messaging format, which is highly dependable but has limitations in terms of the amount of information it can convey.

Additional information that cannot be conveyed through MT103 and MT199 is typically sent in an accompanying email. Some payment systems use their own proprietary format, while others adhere to the ISO 8583 messaging standard for card payments.

Cross-border payments face a major challenge in interoperability. Faster payments require compatibility between systems to reduce transaction time and risk. ISO 20022 is being adopted by many countries to improve compatibility, but it is a long-term solution that requires time and effort. Despite this delay, standardising global messaging formats is necessary for an evolved cross-border payments system.

Customer experience differs by geography: Cross-border payments also pose a challenge in terms of cultural differences. To ensure effective solutions, operators must take into account the varying priorities and expectations of customers in different countries. FinTechs have adapted by offering services in multiple languages and tailoring their offerings to multilingual markets.

To know more about how businesses can use a streamlined global payments solution for high growth read Businesses Need A Cross-Border Payment Solution For Massive Growth.