Building Cross-Border Payment Corridors

International money transfers involve complex routing, regulatory compliance across jurisdictions, and settlement in multiple currencies. We share lessons from building cross-border payment infrastructure.

The Cross-Border Challenge

Sending money internationally remains surprisingly difficult. Despite decades of technology advancement, cross-border payments are often slow (days, not seconds), expensive (fees of 5-10% for remittances), and opaque (unclear pricing and delivery times).

For fintech companies building in this space, the opportunity is significant—but so is the complexity.

Understanding Corridor Economics

Each country-to-country payment route (corridor) has unique characteristics:

• Volume and liquidity: GBP-EUR has deep liquidity; GBP-NGN does not
• Regulatory complexity: Some corridors require local licenses; others are accessible via partners
• Payout infrastructure: Bank account penetration varies dramatically by market
• Competition: Established corridors have compressed margins; emerging ones offer opportunity

Understanding these factors determines which corridors are viable and how to approach each market.

Payment Flow Architecture

A typical cross-border payment involves multiple stages:

┌─────────────────────────────────────────────────────────────────┐
│                    Cross-Border Payment Flow                     │
├─────────────────────────────────────────────────────────────────┤
│                                                                  │
│  ┌──────────┐    ┌───────────┐    ┌──────────┐    ┌──────────┐ │
│  │ Collection│───▶│ Compliance│───▶│   FX     │───▶│ Payout   │ │
│  │  (UK)    │    │  Checks   │    │ Conversion│    │ (Dest)   │ │
│  └──────────┘    └───────────┘    └──────────┘    └──────────┘ │
│       │               │                │               │        │
│       ▼               ▼                ▼               ▼        │
│   Debit card     Sanctions          Rate lock      Bank xfer   │
│   Bank xfer      PEP screening      Settlement     Mobile money│
│   Open Banking   Source of funds    Netting        Cash pickup │
│                                                                  │
└─────────────────────────────────────────────────────────────────┘

Collection (Source Country)

How funds enter your system depends on the source market:

• UK: Faster Payments, Open Banking, debit cards
• EU: SEPA, cards, local payment methods
• US: ACH (slow), cards, wire (expensive)

Compliance Layer

Every payment requires:

• Sanctions screening (sender, recipient, banks in the chain)
• PEP checks where applicable
• Transaction monitoring against known patterns
• Source of funds verification for larger amounts

FX Conversion

Currency conversion is often where margin is made—and lost. Consider:

• When to lock rates (at order time vs. settlement)
• Managing FX exposure across time zones
• Building vs. buying treasury capabilities

Payout (Destination Country)

The "last mile" varies dramatically:

• Developed markets: Bank account transfers
• Emerging markets: Mobile money (M-Pesa, GCash), cash pickup, bank transfer
• Underbanked populations: Agent networks, mobile wallets

Partner Integration

Few companies build end-to-end cross-border infrastructure. Most rely on partners:

Payout Partners

Local partners handle the last mile in destination countries. Key evaluation criteria:

• Coverage: Which payout methods in which regions?
• Reliability: SLAs and actual performance
• Cost: Transaction fees and FX spread
• Integration: API quality and support

Correspondent Banks

For bank-to-bank corridors, correspondent banking relationships enable settlement. These are harder to establish and maintain but offer better economics at scale.

Regulatory Considerations

Cross-border payments trigger multiple regulatory requirements:

• UK: FCA authorization as a payment institution
• Destination countries: Varying requirements—some allow partnerships, others require local licenses
• Sanctions compliance: OFAC (US), UK sanctions, EU sanctions—often all apply
• Data protection: GDPR for EU data, varying requirements elsewhere

Building for Scale

Cross-border systems must handle complexity at volume:

• Corridor-specific routing: Different partners for different routes
• Failover logic: Automatic routing around partner outages
• Rate caching: Serve accurate rates without hammering FX providers
• Reconciliation: Match payments across multiple systems and currencies

Conclusion

Cross-border payments remain one of fintech's largest opportunities. Success requires deep understanding of corridor economics, robust partner integration, and infrastructure that handles complexity while delivering reliable, fast, and affordable transfers. The companies that master this will capture significant value in the ongoing digitisation of global money movement.