How Real-Time Rails Are Redefining Global Money Transfers

Cross-border money transfers, historically marked by multi-day delays, are increasingly happening in real time.

The payment rails, technologies, and companies driving this change currently make up a $47.06 billion real-time payments market. And according to Fortune Business Insights, the market is expected to grow by 960.3% over the next 8 years.

The unprecedented rise in real-time payments is, to a large extent, founded upon instant payment rails (domestic, regional, and global) that have institutionalized digital networks and infrastructure to enable real-time transfers 24/7/365.

Today, the outcome of efforts in this direction is evidenced in the gradual shift from consumer perception of instant payment as a premium feature to seeing it as the baseline.

As a result, banks and payment service providers are adapting their payment infrastructure to align with instant payment rails and consumer expectations.

This article examines key contexts that propelled real-time payments into global money transfers.

The Shift from Batch to Real-Time

Traditional cross-border finance relied heavily on correspondent banking and batch settlements, with settlement timelines usually within the T+1 to T+3 days range.

Interestingly, according to Federal Reserve History, domestic wires in countries like the US were already being completed the same day or even within 30 minutes in the early to mid-1900s, becoming increasingly faster as more efficient technologies emerged.

To meet up with instant payment standards set by real-time domestic rails, international money transfer services had to work extensively across two major domains:

• Correspondent banking: Address diverging regulatory or operational hurdles hampering smooth communication and settlements among intermediary banks and financial service providers, while making attempts to establish direct relationships with local banks in each payment corridor.
• Batch settlements: Link with regional or domestic instant-payment networks (like Pix in Brazil) and similar processes that limit the need for grouping and batch-scheduling of transactions.

Adapting networks and processes across these major domains enabled the shift from batch to real-time transactions, allowing international payment providers to operate at the same efficiency as real-time domestic rails.

What’s Driving Adoption

With domestic payment services having proved to consumers that real-time transactions are possible and could be a norm, consumers’ expectations have also extended to global payment processors to match local payment realities.

In a 2024 study conducted by the Federal Reserve Financial Services, 78% of consumers indicated a preference for faster payment methods. This equally indicates a ready market for providers who can meet these demands at home and abroad.

At the primary market level, competitive pressure from fintech challengers in international payment corridors nudges traditional banks to rethink their approach and efforts in the global payment market if they want to meet modern consumer demands.

On a broader scale, regulatory instruments exist to streamline international payments by facilitating a more favorable environment for cross-border payment providers to implement affordable and secure real-time transfers.

The Last-Mile Problem

Connecting foreign senders to a domestic rail at the recipients’ end was one of the major factors that necessitated the use of intermediary services in cross-border payments.

While this resulted in some hurdles across payment rails, SWIFT, for instance, notes that it isn’t the major reason international transfers sometimes take days to complete.

In fact, the network notes that about 75% of cross-border payments it processes get to the beneficiary bank within 10 minutes.

The multi-day delay often occurs at the last mile, the intersection between the time the money gets to the beneficiary bank and when it is credited to the recipient’s account.

Major fintech international money transfer providers solved this problem by linking foreign senders directly with the recipients. In the US-Brazil corridor, for instance, BOSS Money customers can receive money in Brazil using instant local payment systems and banks supported by Pix.

Essentially, by working with local instant payment rails (where they exist) like Pix, UPI, and M-Pesa, global money transfer service providers can eliminate the last-mile problem in applicable rails.

What This Means for Providers

Partnering with local instant payment rails is what works. These systems, in various rails, typically have broader and deeper reach in local markets using well-established payment infrastructures and are usually compliant with local regulations.

Payment service providers and banks can capitalize on the already-existing instant payment infrastructure and regulatory ease to facilitate real-time payments for their target customers in such markets.

For many payment providers, this means adopting API-first infrastructure for market-by-market local rail integrations, basically taking a managed plug-and-play approach for instant compliance and liquidity management at scale.

Forward Look

Real-time is becoming table stakes. For the vast majority of consumers, instant payment is now the baseline expectation. Providers who are slow to or fail to adapt may lose their market share in payment corridors they once dominated.

Even amongst fintechs driving advancements in the global real-time payments market, new dimensions of differentiation are also emerging. Since real-time payments are now the norm, attention is shifting to the extent of coverage providers are able to offer their customers.

Payment service providers (PSPs) and banks that offer instant payments to a very limited number of corridors may find it difficult to capture customers that send money frequently to multiple recipients in different countries.

Therefore, it makes sense for forward-thinking service providers to also consider broader payment corridor support alongside improving their payment infrastructure for real-time, frictionless cross-border payments.

It is also important to recognize that some basic expectations remain strongly relevant. According to the Federal Reserve Financial Services survey:

• 82% of consumers cite real-time notification as important for real-time payments.
• 26% of the silent generation are greatly concerned by poor security and the possibility of fraud.
• About one-quarter of consumers value convenience and simplicity of use as substantial factors that can drive adoption of instant payments.

Therefore, as payment service providers continue to build for the future of instant payments, they must not sacrifice real-time notifications, security, or simplicity.