Global reforms are pushing cross-border payment costs down. Here is what that means for UK SMEs selling abroad, and where the hidden fees still lurk.
In 2022, the G20 set a target that sounded almost utopian: reduce the global average cost of sending money across borders to below 3% by 2027. At the time, the average sat at around 6.3%. Depending on the corridor, it could reach 10% or more.
We are not there yet. But something meaningful is happening. And if your business sells internationally, whether you are shipping physical goods to Europe, invoicing clients in the United States, or accepting card payments from tourists in your London shop, you need to understand it.
According to the World Bank Remittance Prices Worldwide database (Q4 2024), the global average cost of sending $200 has fallen to approximately 4.84%. That is still well above the G20 target, but the trajectory is downward. More importantly for UK SMEs, the specific corridors that matter most to British exporters are seeing faster improvement.
The Bank for International Settlements' Committee on Payments and Market Infrastructures (CPMI) published its progress report on the G20 roadmap in late 2024 and confirmed that real-time gross settlement interlinking, enhanced data standards through ISO 20022, and the expansion of payment versus payment mechanisms are all contributing to measurable cost reduction in wholesale and retail cross-border flows.
McKinsey's Global Payments Report 2024 adds further context: cross-border payment revenues are projected to reach $280 billion by 2027, driven largely by volume growth rather than margin expansion. Translation: the pie is growing, but the slice each intermediary takes is shrinking. That is broadly good news for businesses.
Three forces are converging.
First, infrastructure is improving. Systems like India's UPI, Brazil's Pix, and Singapore's PayNow are increasingly being linked to each other and to legacy systems in Europe and North America. The Monetary Authority of Singapore and Bank Negara Malaysia launched a live bilateral real-time payments link in 2021. India and Singapore linked UPI to PayNow in early 2023. Each bilateral linkage removes at least one correspondent banking layer from the equation, and with it, a layer of fees.
Second, ISO 20022 is finally arriving. The UK's CHAPS system completed its migration to ISO 20022 in 2023. SWIFT's cross-border ISO 20022 migration is running in parallel. What this means in practice is richer data travelling with each payment. Richer data means fewer manual interventions, fewer compliance holds, and faster settlement. Speed, in cross-border payments, is not just a convenience. It is a cost driver. A payment held for three days in a correspondent bank's nostro account represents a real funding cost.
Third, regulation is forcing transparency. The EU's revised Regulation (EU) 2021/1230 on cross-border payments requires that fees on euro-denominated cross-border transactions within the EU match domestic equivalents. The UK is no longer subject to this regulation post-Brexit, but competitive pressure from EU-based fintechs offering UK businesses European payment rails has created a de facto transparency effect. When Wise or Revolut Business can show you the exact exchange rate markup on a single screen, the major banks can no longer hide theirs in a blended rate and call it a service charge.
Here is where you need to keep your eyes open. The improvements above are real, but they are not evenly distributed.
Card acceptance fees on international transactions remain stubbornly high. When a customer from the United States pays your UK e-commerce site with their Visa or Mastercard, you are likely paying an interchange rate plus a cross-border assessment fee. Visa charges a 0.40% cross-border fee on top of interchange for transactions where the issuing country differs from the merchant country. Mastercard applies a similar structure. Following Brexit, UK merchants lost the benefit of the EU interchange fee caps (0.2% for consumer debit, 0.3% for consumer credit) on transactions from European-issued cards. The Payment Systems Regulator has been actively investigating this. Its interim report in 2023 found that Visa and Mastercard collectively raised UK cross-border interchange fees by as much as five times post-Brexit, with estimated additional costs to UK businesses of £150 million to £200 million per year. The PSR's final decision, published in 2024, imposed remedies including an interim cap and an ongoing market review. This is a live regulatory battleground, and one that directly affects your bottom line if you sell to European customers online.
Currency conversion remains a revenue centre for banks. Dynamic currency conversion, the practice whereby a foreign cardholder is offered the chance to pay in their home currency at the point of sale, typically involves markups of 3% to 7% above mid-market rates. The markup goes mostly to the acquiring bank or terminal provider, with a small share to the merchant. It looks like a service. It is largely a fee in disguise. Always know whether your payment terminal is offering DCC and whether you have opted in or out.
Smaller corridors remain expensive. Sending or receiving payments from markets in Sub-Saharan Africa, parts of South Asia, and Latin America still carries significant cost. If your business has supply chain relationships or customer bases in these regions, the G20 target of 3% remains a distant aspiration rather than a current reality.
This is not academic. Here are four concrete actions worth taking.
1. Audit your international acceptance costs now. Pull your merchant statements and separate out domestic transactions from international card transactions. Identify what you are paying in cross-border fees and foreign currency assessment charges. Many business owners have no idea these are separate line items. They are.
2. Ask your payment provider specifically about international pricing. Not all payment providers pass through the lower costs that are emerging from the infrastructure improvements above. Some absorb them as margin. Ask your provider: what is my effective rate on EU-issued card transactions? What is it on US-issued cards? Compare these figures.
3. Consider multi-currency accounts for regular international revenue. If you receive meaningful revenue in euros or US dollars, holding those balances in a multi-currency account rather than converting immediately can reduce your exposure to unfavourable spot rates. Providers like Wise Business, Airwallex, and several UK-licenced fintechs offer this. The FCA maintains a register of authorised payment institutions; verify any provider you use is listed.
4. Watch the PSR's cross-border interchange remedy closely. The remedies imposed in 2024 are subject to ongoing review. If you sell significantly to European customers online, subscribing to PSR consultation updates costs nothing and could save you thousands. The PSR publishes at psr.org.uk.
The direction of travel is clear. Cross-border payments are becoming faster, cheaper, and more transparent. The plumbing is being upgraded at an infrastructure level that most business owners will never see, but whose effects will eventually show up in their payment processing statements.
The caveat is this: the benefits will not arrive automatically at your door. They will be captured first by businesses that understand what they are paying, ask the right questions of their payment providers, and stay informed as regulations evolve. The PSR's intervention on post-Brexit interchange fees alone represents a structural shift worth monitoring. For a UK SME processing £50,000 per month in European card transactions, the difference between pre- and post-remedy rates could be meaningful enough to matter.
Global payment infrastructure is one of those things that only becomes visible when it fails. But understanding it even a little, knowing that ISO 20022 reduces friction, that real-time system linkages cut intermediary costs, that card scheme fees are under regulatory scrutiny, puts you in a far stronger position than most of your competitors.
And in a market where margins are tight and every percentage point counts, that is worth something.
Klipy helps UK SMEs understand and reduce their payment costs. If you want a plain-English breakdown of what you are currently paying to accept international cards, start with your merchant statement and our cost comparison tool.
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Disclaimer
The views and information shared in this post are for educational and informational purposes only and do not constitute financial, legal, or professional advice. While every effort is made to ensure accuracy, Klipy UK Limited accepts no liability for decisions made based on this content. Payment processing rates, regulations, and product features referenced are subject to change. Klipy UK is an authorised seller of Teya payment solutions. Where third-party sources are cited, links are provided for reference; Klipy UK does not endorse or guarantee the accuracy of external content. For personalised guidance on your business payment needs, please contact us directly at editor@klipy.uk.
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This content is published by Klipy UK, a Teya-authorised reseller of payment solutions. The views expressed are for informational purposes only and do not constitute financial advice. All content is the intellectual property of Klipy UK. Reproduction without permission is prohibited.
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