The correspondent banking model, which has dominated cross-border payments for years, is—at best—a deeply flawed system. It relies on manual processes, after-the-fact audits, and “trust” in foreign banks’ compliance, despite regulators confirming only 0.0001% of transactions are ever reviewed. And the ability to make a cross-border payment is critically dependent on correspondent banks – their foreign currency reserves and reach. Meanwhile, the rise of new and compelling systems like Mastercard Move and Visa Direct, along with emerging payment types such as stablecoins and real-time payments, while attractive to banks and their customers, have only added further complexity to an already fragmented landscape.
Traditional core banking systems, digital platforms, and supporting infrastructure were never designed to accommodate these new paradigms. As a result, banks remain largely unprepared—not only to manage the heightened risk and compliance obligations they bring, but also to efficiently orchestrate payments across these channels.
Gary Palmer, President and CEO of Payall Payment Systems, told PaymentsJournal that global payments orchestration with specialty intelligence, more than just a global gateway, has become a necessity for financial institutions looking to serve the surging cross-border payments market.
Comprehensive payments orchestration can digitize many labor-intensive processes (not just move money), such as counterparty risk management, real-time transaction monitoring, and multijurisdictional compliance. It can also function as a super switch—an intelligent hub that analyzes payment attributes such as size, commercial activity, or source of funds, B2B vs B2P, desired delivery speed, preferred recipient payment form factor—and routes the payment accordingly. The result? A new paradigm, aligned with new partners, that supports diverse mechanisms used to move funds around the world.
Legacy Bank Systems Weren’t Built for This
When a financial institution enables a transaction from a bank account, it typically delivers the payment across a domestic network. In the U.S., this could mean the ACH network, Fedwire, or even real-time payments systems like RTP or FedNow. These are the networks most core banking systems can interface with, albeit adopting new options like RTP and FedNow isn’t easy for banks or their tech partners.
However, the ways consumers move money from their bank accounts have expanded far beyond simple routing between accounts. For example, funds may now be sent from, or to, an account to a mobile wallet or a digital payments platform—transactions that often fall outside the scope of bank systems, both domestically and internationally.
“How does a bank move money around the world?” Palmer said. “Most financial institutions would make those arrangements through a correspondent bank, which is another connection. That connection has its own set of complications in terms of message formats, as well as required data, as well as rules that are expected to be executed before the payment is handed off to the correspondent bank.”
“The software that exists in core bank systems was never designed for the complexity and ever-changing nature of cross-border payments,” he said.
Another layer of complication in the correspondent banking system is that it relies on the SWIFT global messaging system, where almost all receiving participants are financial institutions.
Yet, since SWIFT delivers messages to member or participating banks for funds delivery to bank accounts, this only reaches 15–30% of the world’s population. Billions of people remain outside, unable to receive funds through banks that use the SWIFT system, they rely on mobile money, digital wallets, or cash to live from day-to-day.
However, each of these payment form factors operates under its own set of rules. Some rules are mandated by regulation, others are imposed by issuers to mitigate risk or fraud, and still others stem from the limitations of the product itself.
“For example, in some jurisdictions, mobile money wallets can’t accept a business-to-business payment; they can only accept a P2P or a retail payment or a remittance,” Palmer said. “Some have minimum payment amounts, some have maximum payment amounts, some have currency restrictions, and they all have different message formats.”
“There’s no such thing as a bank account number when you’re sending money to a mobile money or a digital wallet, so we’re talking about layered complexity and diversity that no bank system was ever built for,” he said.
And even if funds are going to a bank account, if the final leg of the payment journey is a real-time rail or domestic network in the U.S., the bank identifier is the RTN/routing transit number—not the ABA number. Yet for 50 years, every bank in the world has trained customers to ask for the SWIFT code, ABA number, or wire transfer number. But these won’t work for ACH in the U.S. Similar conditions exist elsewhere. How are billions of people retrained? Not possible – software is the key.
A Breakthrough of the Highest Order
As complex as the cross-border environment has become, there have been some recent steps forward. One of the most substantial developments affecting the market has been the emergence of Mastercard Move and Visa Direct—platforms that leverage the global payment rails of these credit card companies.
These solutions fill a gap created by the steady reduction in the number of correspondent banks in recent years. As a result, partnering with one of the remaining institutions has become increasingly costly and time-consuming.
Unfortunately, onboarding is only the first of many challenges facing banks that want to enter the cross-border payments market.
“That’s where you’re talking about issues that are affecting wire transfers, netting and pooling, and figuring out who owes what in what currency,” said Hugh Thomas, Lead Commercial and Enterprise Payments Analyst at Javelin Strategy & Research. “What time did the transaction happen? What were the two currencies doing at that time? Any number of additional layers of complexity that make moving funds back and forth not nearly as seamless as Venmo, or even cash.”
To combat these issues, Visa and Mastercard have leveraged their established infrastructure to create an alternative to correspondent banking.
They are strong competitors because they are already connected to domestic bank transfer rails through their card business. They also hold massive global liquidity across more than 100 different currencies and operate some of the most efficient foreign exchange trading systems.
More importantly, the reach of Visa Direct and Mastercard Move now extends far beyond financial institutions.
“What they have said is, ‘We need to serve everybody on the planet,’” Palmer added. “’This means we’re going to connect this infrastructure not only to the bank transfer rails, but we’re going to connect it to mobile money, digital wallets, and cash disbursement engines.’”
“They say to originating institutions anywhere in the world: ‘You don’t need a correspondent bank, you can connect to us,’” he said. “‘Here are our APIs and operating rules, connect to us and we’ll deliver funds fast to bank accounts, mobile money, digital wallets, and cash.’ This is a breakthrough of the highest order.”
The Promise of Payments Orchestration
Even though Mastercard Move and Visa Direct are game-changing systems for originating institutions, there is a caveat: the institution must be able to connect to these systems. And it’s not just one connection today, Visa and Mastercard offer multiple connection points for different types, routes or other distinctions.
“They have their own set of APIs,” Palmer said. “They have their own set of rules that require new software and new capabilities. Before you do that, you need a payment orchestrator who has built the software to comply with the regs, who’s connected into their APIs and is perpetually maintaining that current state of connections because—just like on card issuing and card acquiring—there are periodic changes to the rules and the system, and the participants have to update their software.”
However, connecting to Mastercard Move and Visa Direct is just one benefit of a robust payments orchestration platform. Payments orchestration consolidates multiple payment types into a single intelligent hub, reducing the need to manage disparate vendors and systems.
This means that payments can be routed intelligently across the safest, most cost-effective channels, creating a better customer experience with less friction.
Leading payments orchestration platforms also incorporate risk controls, fraud defense, and regulatory alignment. Additionally, they provide tools to support counterparty risk management, real-time monitoring, and compliance procedures.
Among all these benefits, one of the most important aspects of payments orchestration is that it brings options. This could mean enabling a new currency, a new recipient form factor, or expanding into a new country. It also gives institutions the freedom to send one-off payments of all sizes and types.
“A payment network that we’re connected to may say, ‘We handle B2B payments, not P2P,’ so it’s the type of payment that needs to be routed,” Palmer said. “Taking a step deeper, some correspondent banks won’t support certain industries. Maybe it’s gaming, maybe it’s chemicals manufacturing, or pharmaceutical manufacturing. Having software logic that allows for the interrogation of the data associated with the originator to make sure that you route it to the partner who supports the payment becomes important.”
Redundancy, Always-On Service
With the global contraction of correspondent banks, financial system instability in some regions, de-banking by correspondent banks of originating institutions, and geopolitical complications, redundancy is another key feature of payments orchestration. It’s not optional—it’s survival. The complex nature of the correspondent banking system means a bank’s relationships will likely shift over time.
“Many financial institutions around the world struggle, and it costs them a lot to find an American correspondent bank,” Palmer said. “Many of them, after six months or a year, get debanked, and it starts all over again.”
“A payment orchestrator like Payall can enable and support the existing relationship an originating institution may have with a correspondent bank, but then we can layer in access to Mastercard Move, Visa Direct, or another correspondent bank—or yet another paradigm—enabling redundancy so that you have backup,” he said.
Such platforms can also enable intelligent switching in cases where a customer prioritizes speed over cost, routing the payment across the network that delivers it the fastest. Alternatively, the size of the payment may determine which rail it should travel on.
Given these complexities in the global payments landscape, building an effective solution from scratch has become nearly impossible. Even connecting to Mastercard Move or Visa Direct can cost a bank millions and take months to implement.
And even then, connections to correspondent banks will still need to be established in many cases. Each of these connections carries cost and time requirements—both of which can be significantly reduced by leveraging a payments orchestration platform.
“A specialist in global payment orchestration with all of the software built specifically for this case represents an order of magnitude in efficiency and simplicity for the originating institution,” Palmer said.
“It’s a better product, it’s redundancy, and it’s reaching 90% to 95% of the people on the planet,” he said. “It’s having a product that’s financially competitive, with low overhead in terms of risk support, and investigations for customer service issues. And it’s cheap to get live and operate.”
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