5 Challenges in Cross-Border Mobile Payments and Solutions

Cross-border mobile payments are growing fast but face major challenges. These payments are expected to skyrocket from $8 billion in 2023 to $290 trillion by 2030, yet issues like high fees, slow processing, and security risks persist. Here’s a quick breakdown of the key challenges and their solutions:

Currency Fluctuations: Exchange rate volatility can impact transaction value.
Solution: Real-time settlement systems and stablecoins reduce risks.
Regulatory Differences: Conflicting rules make compliance costly and complex.
Solution: Regional frameworks like PAPSS unify standards.
High Costs and Delays: Hidden fees and slow processing frustrate users.
Solution: Direct mobile wallet integrations cut costs and speed up transactions.
Fraud Risks: Cross-border payments are vulnerable to scams and attacks.
Solution: AI-driven tools enhance security and detect fraud in real time.
Connectivity Issues: Limited network interoperability hampers efficiency.
Solution: API partnerships bridge gaps between systems.

These solutions, driven by technology and collaboration, are reshaping the global payment landscape, making transactions faster, safer, and more accessible.

1. Currency Changes and Exchange Rate Problems

How Currency Changes Affect Payments

In the world of cross-border mobile payments, managing exchange rate uncertainty is a big deal. Exchange rate fluctuations can wreak havoc on transactions, as the value of money sent across borders might shift between the time it’s initiated and when it’s settled. This creates headaches for both businesses and individuals.

For businesses, the stakes are high. Companies importing raw materials might face soaring costs if their local currency weakens against a supplier’s currency, squeezing profit margins. On the flip side, if their currency strengthens against that of an export market, their products might become too pricey for foreign buyers, potentially hurting sales.

For individuals, especially those sending remittances, timing becomes critical. Imagine someone in New York sending $500 to family in Nigeria. If exchange rates shift unfavorably during processing, the recipient could end up with significantly less local currency. This volatility complicates planning and adds stress for senders and receivers alike.

Foreign exchange (FX) risk also introduces the possibility of losses due to fluctuating rates.

Foreign Exchange Rate Problems
Unpredictable Market Dynamics
Exposure to Exchange Rate Volatility
Conversion and Transfer Fees
Currency Mismatch in Transactions
Operational Disruptions
Legal and Regulatory Challenges

The size of the global foreign exchange market – valued at $805 billion in 2023 – shows just how widespread these challenges are. For payment providers, especially smaller ones, maintaining liquidity in multiple currencies becomes a tough balancing act.

Solution: Real-Time Settlement Systems

One way to tackle these currency risks is through real-time settlement systems. These systems are reshaping how businesses handle foreign exchange issues by processing payments almost instantly, cutting down the time for exchange rate fluctuations to take a toll.

"Businesses are beginning to realize the strategic benefits of real-time payments: not just speed, but enhanced control over working capital, and reduced counterparty risk." – Matthew Purnell, Senior Research Analyst at Juniper Research

The numbers back this up. Global real-time payment volumes are expected to more than double to $58 trillion by 2028. In India, the Unified Payments Interface (UPI) processed an incredible 172 billion transactions in 2024, worth nearly $2.9 trillion. To meet the demand for round-the-clock transactions, J.P. Morgan introduced Wire365 in October 2024. This 24/7 US dollar settlement system allows businesses to clear transactions globally at any time, sidestepping the constraints of traditional banking hours.

Blockchain technology and stablecoins are also stepping up as game-changers. Stablecoins, which are tied to fiat currencies, help reduce volatility for finance teams managing digital assets. Over the past five years, the stablecoin market has surged from $5 billion to over $220 billion, with a staggering $32 trillion in transaction volume recorded in 2024.

"Blockchain and stablecoins are the biggest infrastructure upgrade to payments in decades." – Chris Harmse, Co-Founder & Chief Business Officer, BVNK

Traditional cross-border payments often involve multiple intermediary banks, which drives up costs and slows down settlements. Blockchain networks, on the other hand, streamline the process by reducing the need for intermediaries. But there are still hurdles to overcome.

"The one thing that’s holding back business adoption is differential pricing." – Uzayr Jeenah, Leader in the global payments practice at McKinsey

Companies can adopt practical strategies to navigate these challenges. For instance, they might use payment methods with guaranteed exchange rates for a set period or rely on multi-currency accounts to minimize conversion costs .

"The primary challenge for cross-border RTP is not just speed, but settlement… The money needs to change owners instantaneously, and it has to be done using central bank money." – Niklas Lemberg, Head of Industry Engagement at Finnish bank Nordea

Despite the obstacles, the shift toward real-time settlement is gaining momentum. Businesses are increasingly partnering with payment providers that use blockchain technology and stablecoins to address liquidity concerns, especially in emerging markets.

2. Different Rules Across Countries

Problems with Different Regulations

Cross-border mobile payments face more than just currency risks – they’re also tangled in a web of conflicting regulations. These varying rules create a maze of compliance challenges that businesses must navigate.

Take KYC (Know Your Customer), AML (Anti-Money Laundering), and CTF (Counter-Terrorism Financing) requirements, for example. Each country has its own standards, and what works in one jurisdiction might not meet the criteria in another. On top of that, businesses must ensure that none of the involved parties appear on global sanctions lists, as regulations differ widely between nations. And here’s a staggering statistic: while cross-border payments make up just 11% of total transactions, they account for 63% of card fraud cases.

The regulatory maze isn’t just a headache – it’s costly. In 2024, more than 45% of companies cited regulatory issues as a major hurdle to entering new markets. Meanwhile, 73% of financial institutions reported that their compliance costs had jumped by an average of 25%. On top of that, global compliance breaches now cost businesses an average of $14.8 million per incident. Clearly, these challenges demand solutions that extend beyond national boundaries.

Solution: Regional Collaboration Frameworks

One way to tackle these regulatory disparities is through regional collaboration frameworks. These frameworks aim to unify standards and streamline cross-border transactions. A great example is the Pan-African Payment and Settlement System (PAPSS), which supports seamless transactions while promoting financial integration across the continent.

Dr. Ernest Addison, the Governor of the Bank of Ghana, highlights the potential of such initiatives:

"A strong and well-regulated African financial infrastructure could deepen the benefits of intra-regional trade, eliminate the use of third currency for settlement, improve liquidity management of firms, and reduce transaction costs."

The numbers show the stakes: in 2022, 40 million Africans living abroad sent $100.1 billion in cross-border remittances. Of that, $19.4 billion stayed within Africa, while $53 billion went to sub-Saharan Africa. Yet, the average cost of remittances to Africa remains over 7%, far above the United Nations’ target of 3%.

Efforts like the African Union‘s Digital Transformation Strategy (2020–2030) push for shared standards in areas like data protection, fintech regulation, and digital payment systems. PAPSS is even inspiring other regions, with Caribbean Community nations launching a pilot framework in 2023 to enhance trade between the Caribbean and Africa.

But challenges remain. Many African countries lack full interoperability, which limits PAPSS’s scalability. As Dr. Addison points out:

"This brings up pertinent legacy challenges that need to be addressed in this direction, prominent among which are inadequate payment infrastructure and inconsistent compliance, status of the regulatory frameworks, policy coordination, user education and security and fraud concerns."

The Financial Stability Board has called for proportional oversight, urging regulators to treat services with similar risks equally, regardless of whether they’re offered by banks or non-bank entities.

For businesses grappling with these issues, there are practical steps to take. Partnering with local compliance experts, adopting RegTech platforms to stay updated on evolving rules, and using AI-powered AML tools to minimize false positives are all effective strategies. Companies that prioritize compliance often see a 20% boost in customer satisfaction. And with mobile payments expected to hit $12 trillion by 2025, the need for unified regulatory approaches will only grow.

3. High Costs and Slow Processing

Cost Problems in Current Systems

Cross-border mobile payments often come with hefty fees, impacting both businesses and consumers. Beyond issues like exchange rate fluctuations and regulatory barriers, the lack of transparency in fees remains a significant challenge. In 2023, U.S. consumers and small businesses spent $17.9 billion on foreign exchange fees, with $5.8 billion of that being hidden charges. Over in Europe, 92% of banks fail to clearly disclose currency conversion fees, leaving customers unsure of the actual costs involved.

The problem is layered. Costs pile up from currency conversion fees, intermediary bank charges, and compliance expenses. On top of that, financial institutions inflate exchange rates with hidden markups, presenting them as "competitive rates" to maximize profits. The correspondent banking system, essential for international transactions, adds another layer of expense, with these fees ultimately passed on to customers.

Rasika Raina from Mastercard highlights the frustration this creates:

"This lack of transparency causes unnecessary admin and worry for both people and business owners. Rather than focusing on growing their business and doing their job, too many entrepreneurs are spending valuable time trying to stay on top of disparate and vague payment processes."

When customers encounter unexpected fees or can’t use their preferred payment methods, they often abandon their purchases. This not only frustrates consumers but also hurts merchants by reducing conversion rates – a lose-lose scenario for everyone involved.

Solution: Direct Mobile Wallet Integrations

Direct mobile wallet integrations offer a promising way to tackle these high costs and long delays. With cross-border payments expected to exceed $800 billion this year and more than 60% of the global population predicted to use digital wallets by 2026, the potential for change is enormous.

Digital wallets are especially beneficial for underserved communities that lack access to traditional banking services. By linking wallets directly, transactions can bypass the costly and complex correspondent banking system.

The growth in digital wallet usage is staggering. By 2028, global digital wallet transaction volume is projected to hit $12 trillion annually. This creates opportunities for partnerships that can expand access while cutting costs.

Recent collaborations show how effective this approach can be. In October 2023, Visa teamed up with Thunes, a cross-border payments infrastructure provider, to connect users to 79 digital wallet providers worldwide. This partnership allowed Visa Direct to reach digital wallet endpoints in 45 countries, extending its reach to nearly 7 billion endpoints, including over 3 billion cards, 2 billion accounts, and 1.5 billion digital wallets across 190+ regions.

Another example is Visa’s partnership with TerraPay, which connects 86 digital wallets in 44 markets. This collaboration serves over 2 billion individuals and small businesses across Asia-Pacific, CEMEA, and Latin America and the Caribbean.

These integrations also address the issue of slow processing times. Traditional cross-border payments often take two to five business days to settle due to multiple intermediaries, time zone differences, and outdated banking systems. Legacy infrastructure, which relies on batch processing and limited operating hours, only adds to the delays .

Direct wallet integrations simplify this process by enabling real-time settlements without relying on traditional banking channels. This faster, more efficient system not only reduces delays but also lays the groundwork for tackling other challenges, such as fraud prevention and connectivity issues, that continue to affect cross-border mobile payments.

4. Fraud and Security Problems

Fraud in Cross-Border Transactions

Cross-border mobile payments face staggering losses due to fraud, with e-commerce alone losing $41 billion globally to online payment fraud in 2022. By 2023, 80% of organizations reported experiencing payment fraud attacks or attempts.

Fraud in international transactions isn’t just a financial burden – it erodes trust and complicates operations. Fraudsters often target these payments because they involve multiple jurisdictions, making them harder to monitor and secure. These schemes aim to steal funds during transactions between parties in different countries, leading to financial loss, reputational harm, legal troubles, and operational setbacks for businesses.

The tactics used are diverse and sophisticated. Common methods include phishing, business email compromise (BEC), romance scams, fake documentation, and transaction laundering. Cybercriminals also exploit the dark web to trade stolen data, while the anonymity of cryptocurrencies provides another avenue for fraud. Mobile payment platforms are particularly vulnerable, with phishing schemes and fraudulent apps designed to capture sensitive user information. Real-world cases show how hackers exploit trust to divert funds, creating significant risks for businesses.

The financial impact is severe. In 2020 alone, companies lost $17.5 billion due to chargebacks and fraud. For every $1 lost to chargebacks, merchants incur an average cost of $3.75. By 2026, global chargeback volumes could hit 337 million, a 42% increase from 2023.

These challenges demand modern, effective solutions to protect businesses and their customers.

Solution: AI-Driven Security Enhancements

To tackle these growing threats, advanced AI technologies are becoming indispensable. Unlike static, rule-based systems, AI tools continuously learn and adapt, offering a much-needed edge in combating fraud. For example, Visa’s AI-powered VAAI Score has already prevented $1.1 billion in fraud losses by identifying the likelihood of enumeration attacks.

AI excels by processing thousands of data points simultaneously – far surpassing the capabilities of traditional systems, which rely on sequential rule applications. Eastnets reports that machine learning optimization can cut false positives by up to 90%, reducing interruptions for legitimate transactions.

A standout example is JPMorgan Chase’s COIN (Contract Intelligence) program. This AI-driven tool reviews and extracts key data from commercial loan agreements, saving the bank over 360,000 hours of manual work annually.

AI strengthens security through a variety of methods:

Real-time transaction monitoring to detect unusual activity.
Behavioral biometrics that analyze how users interact with systems.
Predictive analytics to forecast potential fraud.
Real-time alerts for suspicious login attempts to prevent account takeovers.

Another key technology is tokenization, which converts sensitive data into secure digital tokens. Even if intercepted, this data remains useless to attackers. Strong Customer Authentication (SCA) measures, like 3D Secure 2.0, add extra verification steps for high-risk transactions, further bolstering security.

Looking ahead, global fraud losses in digital payments are projected to exceed $40 billion by 2027. As Jerome Piens, Chief Product Officer at Swift, puts it:

"Bad actors are using increasingly sophisticated tactics to commit financial crime, and the global financial industry needs to raise its defences higher to ensure their customers can continue to transact globally with confidence."

The takeaway is clear: outdated security measures are no longer sufficient. AI is reshaping payment systems by enhancing security, streamlining processes, and improving user experiences. Businesses that invest in these technologies will be better equipped to protect their customers and adapt to the evolving landscape of cross-border mobile payments.

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5. Connection Problems Between Mobile Networks

Limited Cross-Network Functions

Despite advancements in AI security, connectivity issues continue to disrupt cross-border mobile payments. Many mobile payment systems still operate in isolation, creating silos that make international transfers more complicated. This lack of integration hampers the efficiency of cross-border payments.

The absence of instant cross-border payment systems slows down transactions and drives up costs. Additionally, differing national standards prevent systems from working together smoothly. These interoperability challenges create significant obstacles for both individuals and businesses. With international transfers projected to grow by 5% annually until 2027, and the cross-border payment market expected to reach nearly $3 trillion by 2030, the need for better solutions is becoming urgent.

Karl Rieder, delivery manager at GFT Group, sheds light on the issue:

"Much of the work being done in mobile payments, be it by banks, operators or third parties, is country specific right now… This is why companies like PayPal, which have no international issues, are so compelling."

Dom Keen, CEO of MoPowered, also points out the missed opportunities:

"The growing market for digital gaming and internationalised goods is seeing a small but growing need for internationalised mobile payments that, so far, isn’t being met."

Solution: API-Driven Partnerships

API-driven partnerships offer a promising way to bridge the connectivity gaps between mobile networks. By using standardized Application Programming Interfaces (APIs), these partnerships enable seamless communication across previously isolated systems. The potential is enormous: the network API market could generate $100 billion to $300 billion in connectivity and edge-computing revenue for operators over the next five to seven years, with an additional $10 billion to $30 billion coming directly from APIs themselves.

Key initiatives are already making strides. For example, the GSMA and Linux Foundation‘s CAMARA project, launched between 2022 and 2023, is working to create unified definitions for network APIs. This allows developers to use a single codebase to access 5G capabilities across multiple networks. Real-world examples of this collaboration are emerging. In November 2023, Brazilian operators Claro, TIM Brasil, and Vivo collaborated to deploy three CAMARA APIs aimed at improving digital security, with support from Infobip as a technical integrator and Microsoft Azure as a service platform. Similarly, in September 2023, Deutsche Telekom and Vonage introduced MagentaBusiness APIs, empowering developers to create applications leveraging Deutsche Telekom’s network capabilities.

These efforts go beyond just technical improvements. Industry leaders agree that network APIs are reshaping telecommunications by fostering innovation, driving growth through collective network capabilities, and laying the groundwork for next-generation digital services – similar to the impact 4G had on everyday applications.

To fully realize this potential, telecom companies must align on common standards, coordinate the release of APIs, and actively engage developer communities. Collaboration across the value chain is essential to ensure APIs work seamlessly across different networks and regions.

Ultimately, these API-driven partnerships are breaking down barriers, connecting isolated networks, and paving the way for more efficient cross-border mobile payments.

Money 20/20: Innovating cross-border payments

Conclusion: Solving Cross-Border Mobile Payment Problems

Cross-border mobile payments face a web of challenges, from currency exchange fluctuations and regulatory disparities to high transaction fees, security risks, and connectivity hurdles. Yet, these obstacles are far from insurmountable. The key lies in a unified approach that combines technological advancements with strategic partnerships.

The shift is already underway. Consumers are driving this change, with more people worldwide opting for digital wallets to handle cross-border transactions. This growing preference reflects a fundamental transformation in how global payments are expected to work.

Financial institutions are also stepping up. In fact, 62% of banks in the U.S. and U.K. working on cross-border payment innovations are doing so through partnerships with FinTech companies. These collaborations are crucial because no single player can address these issues alone.

Real-world examples highlight the progress being made. Take Mastercard’s recent $300 million investment in Corpay‘s cross-border business, which secured an exclusive partnership to streamline B2B payment solutions. Raj Seshadri, Mastercard’s chief commercial payments officer, described it as:

"This represents the natural extension of our commercial cross-border solutions. Our work with Corpay expands our reach into the large and growing cross-border B2B payments space helping our financial institution partners deliver on the non-carded needs of their commercial customers, simply and efficiently."

Technology is playing a transformative role in this evolution. AI-powered fraud detection is becoming indispensable, with global spending on such tools expected to hit $10 billion by 2027. Meanwhile, APIs are bridging connectivity gaps, enabling real-time data sharing.

The potential of the global payment ecosystem is immense. By 2030, global payments are projected to reach around $290 trillion. Real-time payment networks are also expanding rapidly, with 226.2 billion transactions processed in 2023 alone – a 42.2% increase compared to the previous year.

To fully realize this potential, the industry needs to focus on three critical strategies: fostering collaboration among governments, financial institutions, and tech companies; adopting cutting-edge technologies like AI, blockchain, and APIs; and harmonizing regulations to simplify compliance while ensuring strong security.

Vijay Lulla of J.P. Morgan underscores the importance of a collective effort:

"As cross-border payments continue to grow and technology evolves, so will the risk around cybersecurity and fraud. As an industry we all need to come together ensuring that security remains a collective priority."

The future of cross-border mobile payments isn’t just about addressing today’s issues. It’s about building a global financial system that’s seamless, secure, and efficient – one that meets the needs of everyone, from individual users to multinational corporations.

FAQs

How do real-time settlement systems and stablecoins reduce currency fluctuation risks in cross-border mobile payments?

Real-time settlement systems and stablecoins are key to reducing the risks tied to currency fluctuations in cross-border mobile payments. Instant settlement through real-time systems significantly cuts down the time funds are exposed to exchange rate changes, which can lead to unexpected losses in traditional multi-day settlement processes.

Stablecoins, usually pegged to stable assets like the US dollar, maintain a consistent value. This removes much of the uncertainty caused by fluctuating foreign exchange rates, allowing businesses and individuals to transact in a dependable currency. The result? The amount received is much closer to what was expected. On top of that, stablecoins often come with faster transaction speeds and lower fees, making cross-border payments smoother and more cost-effective.

How do regional frameworks like PAPSS help overcome regulatory challenges in cross-border payments?

Regional initiatives like the Pan-African Payment and Settlement System (PAPSS) are transforming cross-border payments by tackling the challenges posed by differing regulations between countries. PAPSS enables transactions in local currencies, cutting out the need for foreign exchange and slashing the costs tied to currency conversion. This not only speeds up payment processes but also makes them more affordable – an especially big win for small and medium-sized businesses (SMEs) that often face steep fees and frustrating delays with traditional payment systems.

Beyond simplifying transactions, PAPSS also works to align payment regulations among participating countries. This harmonization reduces compliance hurdles and helps lower trade barriers. By establishing a shared payment network, PAPSS promotes economic integration, shields businesses from the uncertainties of currency fluctuations, and builds trust for those navigating cross-border operations.

How does AI improve fraud detection and prevention in cross-border mobile payments?

AI plays a key role in improving fraud detection and prevention in cross-border mobile payment systems by analyzing transaction patterns in real time with advanced algorithms. Using machine learning, it can spot unusual behaviors like irregular transaction frequencies, unexpected locations, or unfamiliar devices – potential red flags for fraudulent activity.

What’s more, AI systems continuously learn from emerging fraud patterns. Over time, this makes them more accurate, cutting down on false alarms. The result? Enhanced security and smoother transactions, which help build trust between users and businesses in the global payment landscape.