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Next-generation international payments: utopia or the near future?
In a world where immediate, real-time access to anything from train travel and news to shopping with same-day delivery have become standard, traditional payment methods can appear slow and unwieldy. The payments ecosystem is on the cusp of a technological leap forward to next-generation banking, as Oonagh McGrane, Director, Institutional Propositions & Network, explains. Are cost-effective, trackable, and fast international payments around the clock a practical reality or a mere pipedream? And perhaps even more crucially, how can banks prepare for change?
Read time: 8 mins Added: 13/10/25
The winds of change in correspondent banking
To understand the future of international payments, we need to look at their past. International payments have historically stayed in the domain of correspondent banks, leveraging their access to domestic schemes to underpin the long-established Nostro/Vostro model with international banking partners. In the UK, the bulk of the 38 direct participants in CHAPS are domestic, international, and custody banks. Indirect access, when provided by those direct members, extends to thousands more Correspondent and Indirect participants around the world.
The situation is different, however, when you look at the 47 direct participants of the more recently established Faster Payments Service in the UK, which is much more diverse. Newer Payment Service Providers (PSPs) such as Wise, Modulr, and Revolut have joined, alongside UK domestic and international banks. This means that they too are able to provide their clients with direct access to clearing systems, and indirect access via their network of correspondent banks.
The diversifying of scheme participants is just one key aspect of change. There is a broad range of other challenges that face the already complex traditional correspondent banking model:
- Operational complexity: Multiple messages and reconciliation processes introduce multiple points of potential failure or delay.
- Compliance burden: Duplicated KYC (Know Your Customer) and AML (Anti-money Laundering) processes across different parties that carry high costs and risk of penalties require focused risk management.
- Network decline: There are fewer correspondent bank corridors, exacerbated by financial exclusion in emerging markets.
- Cost, speed, transparency: Higher fees, settlement times, and lack of consistent real-time tracking hamper experience.
- Fragmentation: Multiple standards, a lack of global interoperability, and time zone differences all contribute to a disconnected feel.
- Liquidity management: Funding requirements and trapped capital in Nostro/Vostro accounts make it a sub-optimal model for banks with smaller currency flow.
- Competitive pressure: FinTech, big tech, and new payment rails are challenging incumbents.
- Strategic business model: Margin erosion and a need for new revenue streams are creating pressure to transform legacy systems.
Correspondent banking is therefore under pressure from regulatory, operational, and technological challenges. Banks are being forced to rethink their approach to cross-border payments, with a focus on automation, collaboration, and customer-centric innovation.
Cost, speed, transparency: the barriers to overcome
The Financial Stability Board (FSB) in coordination with the Committee on Payments and Market Infrastructures (CPMI), has named cost, transparency and speeds as key challenges in international payments.
Cost
International payments carry direct costs to both customers and correspondent banks, as well as indirect correspondent charges during the transaction lifecycle. While straight-through processing can reduce the direct costs, indirect interbank charges are harder to influence. To reduce the combined total costs for both fee and FX, the FSB intends to reduce the global average for retail payments by 2027. Yet for lower value flow, cost remains a tough challenge.
Speed
Although speed has long been a core issue in the field of international payments, tables are beginning to turn. As a Swift GPI member, we are seeing some impressive delivery timeframes in our overall statistics. Our counterparty completion rates are coming in at 58% in 5 minutes, 80% in 2 hours, and 98% in 24 hours. Our figures align with what Swift are seeing themselves. 60% of Swift GPI payments are being credited to end beneficiaries within 30 minutes and almost 100% within 24 hours.
Transparency
Clients should be given clarity on all elements of the transaction. This can range from the data required for the payment, clear signposting of any pre-validation, a breakdown of costs, and FX rates of any currency conversion, up to more high-level views such as outlining the transaction journey, the amount processed, and the time taken to reach the beneficiary.
The rise of the real-time payment
Increased digitalisation has significantly changed consumer expectations and demand, and in turn instigated the need for improvement in the payment ecosystem. In the domestic and international e-payments space, customers are increasingly expecting:
- Speed and instantaneity: Payments and information must be real-time, 24/7, and eliminate or reduce friction.
- Customisation: Offers, advice, and experiences tailored to individual needs.
- Omni-channel experience: Consistency and convenience across digital channels – mobile, web, attended, or unattended.
- Transparency and control: Clear communication, fee visibility, payment tracking, and data privacy controls.
- Choice and flexibility: The ability to choose payment rails, methods and service level.
- Trust and security: Robust data protection, fraud prevention, and confidence in proprietary channels.
As a result, real-time payments are witnessing a surge in popularity. Payments to mobile wallets, the use of QR codes, Government and central bank mandates, and FinTech collaboration are among the factors accelerating instant payment adoption globally.
According to ACI, real-time payment transactions hit a new record in 2023: 266.2 billion globally, up 42.2% year-on-year. Furthermore, it’s estimated that by 2028, real-time payments will reach 575.1 billion transactions and will rise from 19% to 27% of all electronic transactions globally.
The UK saw 1.3 billion Faster Payments (PDF, 934KB) processed during Q1 2025, up 11.7% on the previous year. That value came in at £1.2 trillion, which was up 19% on the previous year. Elsewhere, countries like India (UPI), Brazil (PIX) and Thailand (PromptPay) are also showing large and dynamic growth and the EU’s Instant Payments Regulation comes into effect this year.
Oonagh McGrane Director, Institutional Propositions and Network, Lloyds Corporate & InstitutionalIncreased digitalisation has significantly changed consumer expectations and demand, and in turn instigated the need for improvement in the payment ecosystem.
Beyond traditional payments
Evolution in the payments landscape is not just confined to the shift to real-time payments, however. New innovations are fast transforming the future of transactions.
The tokenised transition
Within the past year, tokenisation (digital representation of money and assets) and Distributed Ledger Technology (shared programmable platforms) are emerging as potential game-changers for payments. We have just passed the milestone of our 100th digital trade transaction this year, underpinned by tokenisation technology. In July, we achieved a UK first in digital finance. We worked with Aberdeen Investments and Archax, the UK regulated digital asset exchange, to use a tokenised Money Market Fund and a tokenised UK Gilt as collateral for an FX trade between Aberdeen and Lloyds.
This technology is also being applied to cross-border payments through initiatives like Project Agorá by the Bank for International Settlement (BIS), which Lloyds is participating in. Project Agorá aims to use tokenisation and unified ledgers to create a more robust next-generation correspondent banking infrastructure. This could revitalise wholesale cross-border payments, making them as lean as possible by reducing duplication.
With open arms
Open APIs, Open Banking, and Open Finance continue to drive the adoption of immediate payments. They are driving cooperation and seamless integration between banks, FinTechs, corporates, and third-party providers.
Open Banking covers 99% of UK accounts, with 13 million consumers and businesses using the technology, resulting in 1 billion API calls. We have delivered Embedded Payments solutions for clients that cover push and pull payments, as well as event driven notifications. Last year, we launched a Variable Recurrent Payment Confirmation of Payee Fraud Overlay Pilot.
The changing regulatory landscape
Underpinning this technological transformation is a complete revitalisation of national payments infrastructure. The UK’s National Payments Vision aims to deliver a trusted, world-leading payments ecosystem delivered on next-generation technology, where consumers and businesses have a choice of payment methods to meet their needs.
Through the National Payments Vision, the UK Government is focused on equipping Faster Payments for the future, unlocking Open Banking-enabled payments, enhancing cross-border payments and future-proofing the legislative and regulatory framework.
Another crucial factor at play is Swift’s Cross-Border Payments and Reporting+ (CBPR+) standards migration from MT to MX for payment initiation. Most new and modernised Financial Market Infrastructures (FMIs) have either adopted or are migrating to ISO 20022. All major real-time payment systems that launched in the last 5–7 years use ISO 20022 as their core messaging standard.
One of the key benefits of the new standards is increased interoperability. From November 2025, over 11,500 Swift members will all be using the same language, finally enabling the industry to move from compliance to delivering material enhancements with all the predicted operational and client benefits.
Plotting the course ahead
Oonagh McGrane Director, Institutional Propositions & Network, Lloyds Corporate & InstitutionalThe collective impact of these transformative changes is altering the strategic direction of financial institutions. Banks are now shifting from product-centric to platform-centric models, acting as aggregators of financial and non-financial services to keep customer engagement.
So, what should banks be doing now?
The proposition has to start with your customers. Be really clear on what your customers' needs are and appreciate that those needs might differ based on the payments that your customers are making.
Adopt an international payments strategy tailored to look at new models. Tokenisation, unified ledgers, Open APIs, and real-time payments are gaining ground. Recognise the need to grow and decide what next-generation payments mean for your institution.
Upgrade technology and infrastructure. API-driven, ISO 20022-native, and cloud-based architectures will enable agility, scalability, and integration with FinTechs and new payment rails. In tandem, consider your designs for best-in-class, 24/7 operating models.
Join industry initiatives. Explore participation in unified ledgers, tokenised deposit schemes, or DLT and blockchain-based networks (Project Agorá, Swift).
Automate and digitise. Implement straight-through processing, AI-driven compliance, and digital onboarding to reduce manual intervention and errors.
Business models. Re-evaluate transaction fees and FX margins. Consider the wider picture of value-add services and data as a service.
Build talent and culture. Upskill talent on ISO 20022, data, and AI skills.
Transitioning to next-generation banking is an evolution, not just a revolution. It requires customer-centric design, investment in technology, investment in talent, and collaboration. Banks will need to be clear on whether they want to face into building solutions themselves, buy them, or partner with somebody else to fill the gap. Different organisations will have different answers, but there is room for all. The key will be designing and delivering international payment solutions fit for the future, and tailored to customer needs.
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