How banks can adapt to an evolving cross-border payments landscape

In this interview, Mick Fennell of Temenos elaborates on how banks can adapt to a rapidly evolving cross-border payments landscape by embracing digital transformation, navigating rising regulatory demands, and leveraging emerging technologies to meet growing customer expectations and scale globally.

What are the key factors driving the growth and change in cross-border payments today?

One of the primary drivers of growth in cross-border payments has been the steady rise in payments volumes, fuelled by increasing globalisation, migration, and digitisation, along with a broadening range of available services. There is also strong policy momentum behind enhancing cross-border payments, with the G20 prioritising improvements across several key dimensions, including speed, cost, transparency, and access. The growing adoption of the ISO 20022 messaging standard is enabling payment systems to leverage new, richer, more structured data sets that help to enhance efficiency and support strengthened fraud prevention.

At the same time, the emergence of alternative payment networks has been reshaping the landscape. A mix of new entrants and established players are both competing and collaborating with banks to provide payment execution services with broader distribution capabilities and more flexible payout options. Another significant trend is the move to real-time payments. By linking seamless cross-border orchestration with domestic instant clearing services, real-time infrastructure is accelerating the pace and reach of cross-border transactions. Finally, evolving customer expectations continue to play a crucial role. End-users are demanding greater convenience, faster transaction speeds, enhanced visibility, and lower fees – all of which are pushing providers to innovate and adapt.

Which emerging technologies are significantly transforming cross-border payments?

Artificial intelligence (AI) is playing an increasingly important role in transforming cross-border payments. We’re now seeing the benefits of AI models being extensively embedded across various aspects of cross-border payments processing. These include enhanced fraud detection and mitigation, more dynamic exception management and automated repairs, smarter routing based on cost and context, and AI-powered operational tools that boost the efficiency of processing teams.

Cryptocurrencies, stablecoins, and central bank digital currencies (CBDCs) are also reshaping the cross-border payments landscape. Powered by blockchain and distributed ledger technologies, these instruments are providing new ways to transfer value across borders. A key area of transformation lies in securely linking these movements with traditional fiat currency flows, offering the potential for faster, more transparent, and lower-cost settlement.

Cloud technology arguably represents the most fundamental shift, due to it pervading nearly all aspects of payments processing. Today, any new solution on the market typically leads with its cloud- native credentials – without them, it’s difficult to even compete. Cloud-native architectures bring built-in scalability, resiliency, and flexibility, empowering organisations to elevate their services and ensure long-term sustainability.

Meanwhile, APIs are revolutionising how payment systems interact, enhancing communication flows with domestic clearing services as well as international cross-border services provided by SWIFT. This marks a significant move away from traditional message-based communication to more dynamic, real-time, API-based integration.

How is AI being used to enhance the efficiency and security of cross-border transactions?

AI is playing a transformative role across several critical functions within cross-border payments. Fraud detection is becoming more accurate and adaptive. AI models are helping to reduce false positives by learning from historical patterns, not only improving security but also enhancing the customer experience by minimising unnecessary transaction delays.

AI tools are also automating exception management, helping to identify errors, reduce manual intervention, and speed up resolution. Further, AI is being used to power smart and dynamic routing decisions. By analysing multiple variables in real time, AI tools can determine the most efficient path for each transaction, optimising both performance and cost-effectiveness.

In terms of customer engagement, AI is enabling more personalised and responsive user experiences. From virtual agents that provide real-time updates to intelligent interfaces that can anticipate user needs and suggest next actions, AI is elevating the standard of service delivery in cross-border payments. Moreover, AI is helping to unlock smarter, faster, and more actionable insights from payments data, helping banks to identify trends and forecast demand to enable enhanced customer support.

What challenges do banks face in adapting to this evolving environment?

Many banks continue to operate on legacy platforms that lack the open, cloud-native architecture needed to adapt quickly to market shifts. This makes it difficult to integrate new technologies, scale efficiently, or support the flexibility required for modern payments innovation.

Additionally, as payments volumes grow and real-time processing becomes the norm, some banks can struggle to scale their operations without compromising service levels. Maintaining high performance while processing larger volumes at speed can be a critical balancing act.

The shift to real-time payments also means faster fraud. Banks must therefore strengthen their fraud prevention capabilities without introducing friction that could undermine real-time execution timelines. This is a significant challenge, requiring investment in smarter, faster detection systems and better integration of security into payments processes.

Time to market in onboarding and managing multiple payment networks and services is another ongoing pressure for banks. As customers demand more choice and reach, banks need agile, intelligent routing solutions that can seamlessly connect to a variety of providers while ensuring reliability and cost-effectiveness.

Further, embedding AI across payments processes – particularly in areas like fraud mitigation, exception handling, and smart analytics – requires banks to assess how open their current environments are. Legacy systems and siloed data often stand in the way of effective AI deployment.

Finally, with the pace of change in payments technology accelerating, banks must support robust continuous integration and delivery pipelines. The ability to deploy frequent updates, without disruption, is now a baseline requirement for staying competitive and compliant.

How can banks modernise their operations and better position themselves for success?

Banks can take several strategic steps to modernise their operations and better position themselves for success in the evolving cross-border payments landscape. Implementing a cloud-native platform is key, providing the scalability, flexibility, and resilience needed to meet rising transaction volumes, support innovation, and reduce operational costs. Ensuring ISO 20022 native processing can help to unlock access to richer data, improving payment efficiency and supporting regulatory compliance. To serve customers with greater reach and optionality, banks must build flexible access to multiple payment networks, supporting the ability to rapidly onboard new partners and services. Also critical is supporting API engagement with customers and downstream services and embedding AI into core operations.

What steps should banks take to ensure compliance with evolving international regulations?

Selecting partners and suppliers with deep regulatory expertise and proven compliance capabilities is essential. It is important that partner firms demonstrate a commitment to maintaining high standards of transparency and data protection, as well as operational resilience. Banks must also be prepared to commit to long-term investment in regulatory compliance, developing the systems, processes, and talent required to monitor and address regulatory changes. Further, cloud-native platforms play a vital role in enabling compliance at scale, allowing banks to better manage complexity, reduce manual effort, and future-proof their compliance operations.

About the author

With over 30 years’ experience in banking software, including more than two decades in the global payments ecosystem, Mick Fennell is a seasoned expert in business and market development. In his current role at Temenos he is responsible for driving the global business growth strategy of Temenos’ payments offerings, helping clients with their ambitions to scale and prepare for the future.

 

 

About Temenos

Temenos is a global leader in banking technology. Through its market-leading core banking suite and best-in-class modular solutions, Temenos is modernising the banking industry. Banks of all sizes utilise Temenos' adaptable technology – on-premises, in the cloud, or as SaaS – to deliver next-generation services and AI-enhanced experiences that elevate banking for their customers. Temenos' mission is to create a world where people can live their best financial lives.