Cross-Border Payments in Numbers: Global Corporations Lost $120 Billion in Transaction Fees

The current cross-border payment system imposes high costs on businesses and economies worldwide, stifling economic potential and limiting financial inclusivity. Global corporations move $23.5 trillion across countries annually—around a quarter of global GDP—at an estimated cost of $120 billion in transaction fees annually. Any improvement in the efficiency of cross-border transactions would, therefore, lead to considerable benefits for businesses and individuals globally.

However, increasingly strict regulations and high technical costs raise barriers to change. A recent study found that 92% of surveyed businesses still rely on banks as their primary cross-border payment providers, despite more than half of banking and payments executives confirming that their organizations struggle with legacy tech stacks, unable to provide real-time payment solutions.

Though the prospect of global instant payments is on the horizon, businesses and individuals continue to lose money and opportunities due to the current system’s fragmentation, inefficiency, and lack of transparency.

Impacts on global business growth

The challenges associated with cross-border payments significantly impact companies that rely on international suppliers and customers. According to Laura Galdikienė, Chief Economist at ConnectPay, “Cross-border payment challenges increase costs and cause delays that can reduce profit margins and disrupt cash flow. This often results in shipment delays and can complicate timely payments to vendors and employees.” Limited transparency surrounding fees and exchange rates complicates budgeting and forecasting; businesses can lose an average of 3-5% of their transaction value due to confusion and added costs.

These issues can also influence business decisions regarding market expansion and product pricing. High fees and regulatory complexities complicate new market entries, making them more costly for businesses, particularly for smaller companies or those operating in sectors with tight margins. “When transaction costs and exchange rate volatility are high, businesses may adjust their pricing strategies, making their products less competitive in the global market,” Galdikienė explains. This is especially relevant for industries such as manufacturing, retail, and e-commerce, which frequently engage in international transactions.

The impact of payment delays can lead businesses to prefer local suppliers. “Clients and partners may prioritize local suppliers for simplicity, leading to short-term contracts over long-term relationships,” notes Galdikienė. This behavior can stifle the growth potential of companies reliant on cross-border transactions, ultimately limiting their ability to thrive in an increasingly interconnected global economy.

Challenges to financial inclusivity

Cross-border payment challenges disproportionately affect low-income individuals and small businesses in developing regions. Remittances, which many families rely on, often incur high costs; the average remittance transfer fee is around 6%, with some corridors reaching as high as 10%. This can severely impact families who depend on these funds for basic necessities. 

According to a study by the World Bank, a 10% increase in remittance is associated with a 0.66% permanent increase in GDP. “However, cross-border payment issues, such as high fees, delays can prevent countries and individuals from reaping the full benefits of such money transfers,” explains Galdikienė. “For low-income individuals and small businesses relying heavily on remittances and international trade, these barriers prevent them from fully participating in the global economy.”

Additionally, the lack of affordable financial services can inhibit entrepreneurship in emerging markets. “Many small businesses depend on cross-border trade to expand their operations. However, high transaction costs and complex compliance regulations can discourage them from entering global markets. Addressing these financial roadblocks is essential to fostering greater economic participation and inclusivity, making it imperative for stakeholders to work together in creating a more accessible cross-border payments system,” Galdikienė adds.