As fintechs rapidly rewrite the rules of global payments, legacy banks are facing a difficult reality: adapt quickly or risk losing customers. Even cross-border payments—once firmly controlled by large institutional banks—are increasingly being challenged by agile fintechs and neobanks offering faster and more transparent services. And with roughly $150 trillion moving across borders every year, the stakes could hardly be higher.
In a PaymentsJournal Webinar, Tim Forster, Strategic Partners Director at Finastra, Abhi Kumar, Head of Strategic Partnerships at Thunes, and Hugh Thomas, Head of Commercial and Enterprise Payments at Javelin Strategy & Research, explored the growing pressure on traditional banks and why strategic partners may be essential to staying competitive in the fast-moving cross-border payments market.
A Rapidly Changing Landscape
The traditional correspondent banking model in the U.S. has been slow, expensive, and—from the customer’s perspective—relatively opaque. At the same time, the technology side of the payments industry has been driving change through initiatives such as ISO 20022. Many large correspondent banks have also been de-risking, which has reduced the scope of services they can offer.
In other words, the foundations of the traditional model were already beginning to shift before fintechs entered the picture. Fintechs accelerated that change by offering cross-border services that were faster, cheaper, and more customer-friendly.
“Fintechs are appealing to younger audiences,” said Forster. “I’ve seen statistics saying that 42% of Gen Z have used a fintech account for payments. I don’t think banks are used to having that kind of competition in that space.”
These newer revenue streams often lack the traditional loyalty to a single bank. Customers are looking for the lowest execution costs and increasingly expect real-time settlement—precisely what many fintechs are providing.
“Ten years ago, I was pretty skeptical of the notion of consumer experience driving B2B expectations,” said Thomas. “I’ve turned around on that. If I go on holiday and buy a hat, I can see that transaction pop up on my phone. And I know exactly how it manifested in my own currency in something fairly close to real time. Why can you not replicate that experience in my B2B dealing?”
Complications Across Multiple Markets
The weaknesses in the traditional system become even more apparent when payments move across multiple jurisdictions.
Sending funds from a market like the UK to Nigeria—a major corridor for remittances and business payouts—can require three to five intermediary hops. Funds move from a local bank to a correspondent bank, then through additional correspondent banks before reaching the recipient bank in Nigeria. Each hop adds more time, less transparency, and higher fees.
Meanwhile, global volatility is reshaping supply chains rapidly. One week a business may be sourcing from Vietnam; the next, it may shift to Taiwan or Cambodia. Establishing and maintaining correspondent banking relationships in each of these markets is both complex and expensive.
This has been the traditional setup for the past 30 or 40 years. But customer demands have shifted significantly. Businesses and consumers increasingly want faster settlement, greater transparency, and clearer visibility into costs upfront. They don’t want to pay intermediary fees, and global businesses increasingly expect interoperable, plug-and-play capabilities.
Neobanks have already begun encroaching on this territory. Many started with a single use case—for example, Revolut began as a peer-to-peer payments app. After significant investment and expansion, these firms now pose a serious challenge to legacy banks.
The demand for speed and transparency is also extending well beyond P2P payments. Gig workers, content creators, and influencers also expect immediate payouts. Banks offer little incentive to keep these customers from migrating to competing banking or treasury relationships.
Developments such as stablecoins and standalone cross-border payment solutions are also putting additional pressure on the traditional correspondent banking model. For perhaps the first time in years, inertia is no longer the primary force driving cross-border payments. Customers now have real alternatives.
Why Partnerships Matter
For legacy banks trying to compete in this environment, the challenge is not simply adding new features. Most institutions are operating on decades-old infrastructure built around correspondent banking relationships, batch processing, and fragmented regional systems. Replacing those systems outright is unrealistic.
That’s where partnerships can play a critical role. Rather than rebuilding their entire payments stack, banks can work with specialized providers to add capabilities such as real-time settlement, mobile wallet access, stablecoin infrastructure, or multi-currency payout services.
In many cases, banks will need multiple partners rather than a single provider. The goal is to extend existing infrastructure without disrupting core operations or customer relationships.
“Banks are already fairly siloed both from a data perspective and from a technology perspective, as they deal with compliance and anti-money laundering checks and risk,” said Kumar. “But when you cross borders, you have two separate sets of rules, and a chain of custody between different correspondent banks. And you’ve got all this complexity that’s basically being run on 40- or 50-year-old COBOL cores.”
“This is the legacy trap,” he said. “You have data and technology, but they’re not being used to make things better. We’re doing things the same way we were doing [them] 20 to 30 years ago. But we have the technology now.”
Challenges in Emerging Markets
The pressure to modernize is especially pronounced in emerging markets, where mobile-first financial ecosystems have often developed faster than traditional banking infrastructure.
In many of these markets, mobile wallets vastly outnumber traditional bank accounts. The cost of opening and maintaining a bank account is often so high that consumers conduct most of their economic activity through digital wallets instead. In Pakistan, users average three and a half mobile wallets each. In the Philippines, mobile wallets account for approximately 71% of economic activity. Banks in the UK or the U.S. that cannot access these ecosystems risk being shut out of those markets entirely.
Experienced partners can help banks operate within these systems more effectively, allowing institutions to stay focused on their core business while still expanding access to new payment rails and customer bases.
“If you’re great at FX and currency hedging, but you’ve got a creaky correspondent banking setup, you’ve got corridors that are becoming less relevant,” said Thomas. “You need to be thinking about how to get where I need to be in a near-term state, and then where I want to be in terms of leading edge.”
There is no simple “rip-and-replace” option for legacy banks. Given existing orchestration layers and accumulated technical debt, banks must take a strategic approach to adopting new technologies—whether mobile wallets, tokenized deposits, or stablecoins. The right partner can provide multiple entry points into that ecosystem.
“This space is offering a variety of options for banks to then tap into, whether it be low technology, immediate impact, but with more basic features or a more feature rich direct integration so [you’ve] got the full spectrum,” said Kumar. “The key is to understand what’s the most immediate low impact.”
Forster added: “You start off basically with the plumbing. Plumbing moves to transparency, tracking compliance, and then you’re moving up out to the user experience.”
A Protective Move
For many banks, the urgency around cross-border payments isn’t only about growth. It’s also about protecting existing customer relationships.
Cross-border payments are the kind of complex offering that can pull customers into deeper strategic discussions about their businesses. Those conversations often extend into working capital management, expansion plans, and broader treasury needs—discussions banks don’t want competitors having with their customers.
For many banking leaders, the goal is not simply to recoup investments in this space as quickly as possible. Expanding cross-border capabilities is as much a defensive strategy as it is a revenue opportunity.
“It’s got to start with conversations with your trusted payments partners,” said Forster. “That gives you the opportunity to create the plan in the best way possible.”