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13 May 2024

What are Cross Border Payments? Wholesale and Retail payments with RBI Guidelines in India

13 May 2024
What are Cross Border Payments? Wholesale and Retail payments with RBI Guidelines in India

Introduction to Cross Border Payments 

Financial transactions involving two parties with distinct national bases—the payer and the recipient—are referred to as cross border payments. They include remittances as well as wholesale and retail payments. There are several ways to make cross-border payments. Currently, the most common means to send money across borders include bank transfers, credit card payments, and alternative payment methods including e-wallets and mobile payments.

There are two primary categories of cross-border payments:

Wholesale Cross-Border Payments

In order to support the cross-border activities of the financial institution’s customers or its own (such as borrowing and lending, foreign exchange, and the trading of equity and debt, derivatives, commodities, and securities), wholesale cross-border payments are usually made between financial institutions. Wholesale cross-border payments are also used by governments and bigger non-financial businesses for significant transactions resulting from the import and export of products and services or financial market activity.

Retail Cross- Border Payments 

Payments made across borders in the retail sector are usually made between people and corporations. Person-to-person, person-to-business, and business-to-business are the three main categories. Remittances are among them; the most common kind is money sent by migrants to their native nations.

What are Cross Border Payments? 

Simply put, cross-border transactions are transfer of assets or funds from one jurisdiction to another.

 Correspondent banks, payment aggregators act as intermediaries between the involved financial institutions. 

The cross-border payments ecosystem includes B2B, B2P, P2B and P2P merchants. Common methods of cross-border payments include wire transfers, International Money Orders, Credit card transactions 

Key Benefits: 

  • Access to international markets: Reduces complexity related to international fund transfer, enabling accessibility on a real time basis 
  • Cost savings: cross-border payment methods can be more cost effective than others, allowing businesses to save money on transaction fees, currency exchange rates, and other related costs
  • Increased revenue and growth opportunities: By selling goods and services internationally, businesses can increase their revenue and tap into new growth opportunities. 

Key Roadblocks:

  • Regulatory compliances: Applicable laws, rules and procedures vary in every jurisdiction. As such, compliances may become challenging to follow. 
  • Currency conversion risks: When conducting business in foreign currencies, companies are exposed to the risk of fluctuating exchange rates 
  • Fraud and security risks: Lack of stringent laws to regulate banking institutions leads to organized criminals target vulnerabilities at certain banks in certain jurisdictions to use them to access wider networks.

RBI Guidelines on Cross Border Payments

RBI has recently issued norms to regulate entities engaged in cross border payments, Essentially, fintech operating in a critical industry and at scale, under its direct regulation. 

The new rules apply to entities that facilitate cross-border payment transactions for the import and export of permissible goods and services in India in online mode. This includes any Authorized Dealer (AD) banks, Payment Aggregators (PAs), and PAs-CB involved in the processing of cross-border payment transactions. 

Some of key rules include:

  • Fresh norms for KYC of merchants.
  • Non-banks providing PA-CB services (as on the date of circular) to have a minimum net worth of ₹15 crore at the time of application for authorization and a minimum net worth of ₹25 crore by March 31, 2026 (Net Worth Criteria). 
  • All non-banks operating in this space need to mandatorily register with the Financial Intelligence Unit of India.
  • Existing payment aggregators to also need RBI go ahead to continue undertaking cross-border payments.


  • Stringent Net Worth Criteria
  • Early-stage startups that will now need to be separately regulated to continue operations
  • No norms for regulating or recognizing the gaming space industry

The Indian economy is a powerhouse, and with its growing global footprint, the need for seamless cross-border payments has never been greater. While significant strides have been made in recent years, there’s still room for improvement. Let’s delve into the current landscape of cross-border payments in India and explore what 2024 might hold.

The Indian Landscape: A Mix of Progress and Challenges

India has witnessed a digital payments revolution. The ubiquitous Unified Payments Interface (UPI) has transformed domestic transactions, boasting over 22.7 billion transactions valued at a staggering $768 billion in 2023 [source: NTT DATA Pay]. However, replicating this success in the cross-border arena has proven trickier.

Here’s a breakdown of the current situation:

  • Traditional Channels Still Dominate: Traditional methods like wire transfers and correspondent banking still hold a significant share of the market. These methods are often slow, expensive, and lack transparency.

  • Regulatory Hurdles: Navigating complex foreign exchange regulations and Know Your Customer (KYC) norms can be cumbersome for businesses and individuals alike.

  • Limited Innovation: Compared to domestic payments, the cross-border space hasn’t seen the same level of technological innovation.

2024: A Year of Opportunities?

Despite the challenges, there are reasons to be optimistic about 2024. Here are some key trends to watch:

  • The Rise of Real-Time Payments (RTPs): The global surge of RTPs, with transaction volumes projected to grow at a staggering 35.5% annually, is expected to reach India as well [source: Thunes]. This could revolutionize cross-border transactions by enabling near-instant settlements.

  • UPI Goes Global: The much-anticipated UPI-PayNow linkage with Singapore promises faster, cheaper remittance options. This paves the way for similar collaborations with other countries, boosting international trade and individual transactions.

  • RegTech to the Rescue: Fintech companies are leveraging RegTech (regulatory technology) to streamline compliance procedures. This can significantly reduce processing times and make cross-border payments more accessible.

What to Expect for Individuals and Businesses

  • Faster and Cheaper Transactions: With advancements in technology and regulations, expect faster settlement times and potentially lower fees for cross-border payments.

  • Greater Transparency: Improved traceability and real-time transaction updates will enhance transparency, giving users more control over their money.

  • More Payment Options: A wider range of payment options, including mobile wallets and digital platforms, will cater to different user preferences.

The Road Ahead

India’s cross-border payments landscape is poised for significant transformation in 2024. While challenges remain, the combined efforts of the government, regulatory bodies, and innovative fintech companies promise a future of faster, more affordable, and user-friendly cross-border transactions. This will not only benefit businesses but also empower individuals to participate more actively in the global economy.


Although there is much promise for cross-border payments, managing the intricacies calls for a measured strategy. Rules are necessary to maintain security and stability, but they shouldn’t stifle creativity and accessibility. Unlocking the full potential of cross-border payments will require striking the correct balance between promoting development and reducing risks as the ecosystem develops, advancing us towards a really globalized and linked future.

FAQs on Cross Border Payments:

  1. What are Cross Border Payments?
    Cross-border payments are simply financial transactions where money moves between individuals or businesses in different countries. These transactions can be for various purposes, like international trade, sending money to family abroad, or online purchases from foreign websites.


  1. What are the benefits of Cross Border Payments?
  • Accessibility: Simplifies and speeds up international fund transfers, enabling real-time transactions.
  • Cost Savings: Offers potentially lower fees compared to traditional methods like wire transfers, reducing transaction costs and currency exchange fees.
  • Growth Opportunities: Opens doors to international markets, expanding customer base and revenue potential for businesses.
  1. What are the challenges associated with Cross Border Payments?
  • Compliance: Navigating the complex regulations and compliance requirements varying across different countries can be complex.
  • Currency Fluctuations: Fluctuations in foreign exchange rates can expose businesses to risks and potential losses.
  • Fraud and Security: Security risks like cyberattacks and fraudulent activities pose potential threats, especially in less regulated environments.
  1. What are the different types of Cross Border Payment methods?
  • Wire Transfers: Traditional method for large transactions, but often slow and expensive.
  • International Money Orders: Convenient for smaller amounts, but with limited reach and slower processing times.
  • Credit Cards: Widely accepted, but subject to high fees and potential fraud risks.
  • Payment Aggregators: Offer convenient and often cost-effective solutions for online transactions.
  • Blockchain-based solutions: Emerging technology offering potential for faster, cheaper, and more secure cross-border payments.
  1. What are the recent RBI regulations for Cross Border Payments in India?
    The Reserve Bank of India (RBI) has issued new guidelines to regulate entities facilitating cross-border payments for import and export. These regulations aim to enhance transparency, security, and financial stability in the ecosystem.
  1. What are the key requirements under the new RBI regulations?
  • Stricter KYC norms for merchants.
  • Minimum net worth requirements for non-bank Payment Aggregators.
  • Mandatory registration with the Financial Intelligence Unit (FIU) for all non-banks.
  • Existing Payment Aggregators also need RBI authorization to continue cross-border operations.
  1. What are the criticisms of the new RBI regulations?
  • Stringent Net Worth Criteria: Critics argue it might hinder participation of early-stage startups in the ecosystem.
  • Lack of Regulation for Specific Industries: No specific norms for regulating payments in industries like online gaming.
  • Potential Burden on Startups: Separate regulation for cross-border payments may add compliance complexity for new players.
  1. Who can benefit from Cross Border Payments?
  • Businesses engaged in international trade: Import/export companies, online businesses selling to foreign customers.
  • Individuals sending money abroad: Sending remittances to family or friends overseas.
  • Investors making international investments: Investing in foreign stocks, bonds, or real estate.
  1. How can I find the best Cross Border Payment solution?
    Several factors influence the choice, including transaction size, frequency, currency pairs, desired speed, and cost. Carefully compare fees, exchange rates, security features, and user reviews before selecting a provider.
  2. What is the future of Cross Border Payments?
    Technological advancements like blockchain and Artificial Intelligence are expected to drive faster, cheaper, and more secure cross-border transactions. Regulatory harmonization and collaboration between countries could further simplify and streamline the process.
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Last updated on
May 13, 2024, 12:03pm


The content of this article is for information purpose only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc. before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that the Author / Treelife is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.

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