How do cross-border payments work?
A cross-border payment is a payment where the banks of the payer and the payee are in different countries. Most of these payments run through correspondent banks, which hold accounts for each other and pass the payment on as a Swift message. The German term is grenzüberschreitende Zahlung.
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Cross-border payments in brief
| Term | Cross-border payment. German: grenzüberschreitende Zahlung. Meaning in the ECB glossary: "a payment where the financial institutions of the payer and the payee are located in different countries". |
|---|---|
| Main channel | Correspondent banking. The number of correspondent banks fell by 22 percent between 2011 and 2019 (FSB, ). |
| Message standard | ISO 20022 on the Swift network since . The MT103 message became pacs.008. |
| G20 targets | 11 targets for cost, speed, access and transparency, most of them due by the end of 2027 (FSB). |
| EU law | Regulation (EU) 2021/1230 on cross-border payments in the Union, . |
What is correspondent banking?
Correspondent banking is an arrangement in which one bank makes or receives payments on behalf of another bank. That is the definition in the ECB glossary. The bank that provides the service is the correspondent bank. The customer bank holds an account with it. The customer bank calls this account its nostro account, and the correspondent calls the same account a loro account.
The role of a correspondent bank is to give another bank access to a currency or a country where that bank has no branch and no account at the central bank. A savings bank in Bavaria that has to pay US dollars to Canada needs a correspondent that holds dollars.
How do cross-border payments work, step by step?
Cross-border payments work as a chain of transfers from bank to bank. A cross-border payment example: a machine builder in Stuttgart pays a supplier in Toronto in US dollars.
- The payer's bank debits the company account and sends a payment message over Swift. Since November 2025 the message is a pacs.008 in ISO 20022, the successor of the MT103.
- The payer's bank has no account with the Canadian bank. It pays from its nostro account at a correspondent bank that holds US dollars.
- The correspondent credits the payee's bank, or a second correspondent that passes the amount on. Each bank in the chain can charge a fee.
- The payee's bank credits the supplier.
The FSB found in 2025 that the last step, from the receipt of the Swift instruction to the credit on the customer account, "has traditionally been the slowest part of a cross-border payment transaction". The G20 targets sort the types of cross-border payments into wholesale payments between financial institutions, retail payments of companies and people, and remittances.
ISO 20022 vs Swift: what is the difference?
Swift is the network that carries payment messages between banks, and ISO 20022 is the standard in which those messages are written. Before 2025, banks sent cross-border payments on Swift in the older MT format. Since , cross-border payments on Swift go only in the ISO 20022 format, called MX (BNY, May 2025).
| MT message | ISO 20022 message | Use |
|---|---|---|
| MT103 | pacs.008 | Payment for a customer |
| MT202 | pacs.009 | Payment between two banks |
| MT202 COV | pacs.009COV | Cover payment between correspondents |
ISO 20022 messages carry structured fields for names, addresses and the purpose of a payment. The G20 roadmap of the FSB has its own work stream on data exchange and message standards. It asks for standardized message formats such as ISO 20022 in cross-border payments.
What are the G20 targets for cross-border payments?
The G20 targets are 11 quantitative goals for the cost, speed, access and transparency of cross-border payments. The FSB set them in its final report of , and the G20 leaders endorsed them the same year. The target date is the end of 2027, except for the cost of remittances.
| Target | Retail payments | Remittances |
|---|---|---|
| Cost | Global average of no more than 1%, no corridor above 3% | No more than 3% for a USD 200 remittance by 2030, no corridor above 5% |
| Speed | 75% available to the payee within one hour, the rest within one business day | 75% within one hour in every corridor, the rest within one business day |
| Access | Every end-user has at least one option to send or receive | More than 90% of the people who wish to send or receive have access |
For wholesale payments the FSB set no cost target. 75% of them are to be credited within one hour. Every provider is to show the payer and payee the total cost, the expected time, the status of the payment and the terms of service.
On the FSB wrote: "It is unlikely that satisfactory improvements at the global level will be achieved in line with the 2027 Roadmap timetable." A retail payment from person to person cost about 2.5% on average, the same as in 2023. A USD 200 remittance cost 6.5%.
Cross-border payments in Germany, Austria and Switzerland
In Germany and Austria, Regulation (EU) 2021/1230 applies directly. Its Article 3(1) says that charges for cross-border payments in euro "shall be the same as the charges levied by that payment service provider for corresponding national payments of the same value". A euro transfer from Vienna to Hamburg therefore costs the same as a transfer of the same amount within Austria. Within the euro area such transfers run as SEPA credit transfers or as instant payments. BaFin supervises banks and payment institutions in Germany, the FMA in Austria.
Switzerland is outside the EU, so the regulation does not apply there. FINMA supervises Swiss banks. Since 1999 Swiss banks have paid euros to each other through euroSIC, a system of SIX. SIX will discontinue euroSIC on . The Swiss Euro Clearing Bank remains available as a euro correspondent bank (SIX, euroSIC). This page gives no legal advice.
Sources
- Financial Stability Board: Targets for Addressing the Four Challenges of Cross-Border Payments: Final Report,
- Financial Stability Board: G20 Roadmap for Cross-border Payments: Consolidated progress report for 2025,
- Financial Stability Board: Cross-border payments, read on
- European Central Bank: Glossary, entries "correspondent banking" and "cross-border payment", read on
- European Central Bank: Glossary, entry "nostro account", read on
- BNY: Update on ISO 20022 end of co-existence, May 2025
- European Union: Regulation (EU) 2021/1230 on cross-border payments in the Union,
- SIX: euroSIC, read on