How Cross-Border Payments (LRS, SWIFT & CBDCs) Are Evolving in 2025

💰 Cross-Border Payments in 2025: Why They’re Still Expensive & Slow

Photo by Alistair MacRobert on Unsplash

Cross-border payments remain frustratingly inefficient despite the fintech boom. Whether you’re an Indian student paying tuition via LRS, a global business making international remittances, or a fintech company optimizing SWIFT transactions, you’ve likely encountered:

✔ Hidden fees & unfavorable forex rates
✔ Slow settlements (often taking 2–5 days)
✔ Opaque banking processes with no tracking

💡 With real-time domestic payments (like UPI in India) becoming instant, why is international money movement still broken? Let’s break it down.

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📊 The Cross-Border Payment Bottleneck: SWIFT, LRS & Banking Delays

Despite fintech advancements, most international transactions still rely on outdated banking rails.

1️⃣ Why SWIFT Transfers Are Expensive & Slow

• Correspondent banking fees: SWIFT transactions often pass through multiple intermediary banks, each taking a cut.

• 2–5 day processing time: Unlike UPI, which is instant, SWIFT-based transfers involve multiple approval steps.

• Opaque fees: Banks don’t disclose exchange markups transparently, increasing costs.

2️⃣ How RBI’s LRS Impacts Outward Remittances

The Liberalized Remittance Scheme (LRS) governs how much money Indian residents can send abroad.

• LRS cap: $250,000 per year for education, travel, and investments.

• TCS (Tax Collected at Source) rules impact forex remittances.

• Banks vs. fintechs: Traditional banks dominate LRS payments, while fintechs are slowly entering.

📌 Key Problem: Even though fintechs like Wise & Nium claim to offer low-cost remittances, they still depend on traditional banking infrastructure, meaning they can’t bypass the inefficiencies of SWIFT.

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🚀 The Future of Cross-Border Payments: What’s Changing in 2025?

✅ 1. UPI, Pix & Instant Payment Networks Going Global

Governments are linking domestic real-time payment systems (RTPs) across countries, reducing dependency on SWIFT.

✔ UPI-PayNow (India & Singapore): Near-instant international money transfers.
✔ PIX (Brazil), FedNow (US): New instant settlement systems expanding.
✔ Challenges: Most RTPs are still regional, and adoption takes time.

💡 The Opportunity: If UPI expands to more countries, outward remittances from India could become faster & cheaper than SWIFT.

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✅ 2. CBDCs & Blockchain – The Future of Global Money Movement?

With over 130 countries exploring Central Bank Digital Currencies (CBDCs), the big question is:

💡 Will CBDCs replace SWIFT & LRS payments?

Potential Benefits:
✔ Instant global transfers (no intermediary banks).
✔ Lower transaction costs (government-backed stable money).
✔ Better compliance tracking (AML/KYC built-in).

Challenges:
⚠ Not all CBDCs will be interoperable – China’s Digital Yuan and India’s Digital Rupee aren’t integrated with global systems yet.
⚠ Private stablecoins (USDC, USDT) are still leading in cross-border crypto payments.

📌 What This Means for Fintechs: While CBDCs are promising, they won’t disrupt SWIFT & LRS until governments agree on global standards.

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🌍 What Needs to Change for Cross-Border Payments to Improve?

For faster, cheaper international payments, these three areas must evolve:

1️⃣ Interoperability Between Payment Systems

• Expand UPI-like networks globally (India-Singapore is a great start).

• Build fintech solutions that integrate directly with RTPs, bypassing SWIFT.

2️⃣ Regulatory Alignment for Faster Transactions

• Governments must streamline AML/KYC compliance, so banks don’t delay transfers.

• India’s LRS & tax rules need modernization to reduce payment friction.

3️⃣ More Innovation in Fintech Remittance Models

• Fintechs must move beyond FX markups & SWIFT rails to adopt blockchain & smart contracts.

• DeFi-based remittance startups could challenge banks if regulations allow.

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💡 Final Thoughts: The Next Decade of Cross-Border Payments

We’re at an inflection point where technology is available, but regulation and banking systems are still catching up.

🚀 The real question isn’t whether cross-border payments will improve—it’s who will drive the change.

What’s your take? Drop your thoughts in the comments or reply to this newsletter.

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