# Cross-Border Payment Infrastructure

## Executive Summary

UK SMEs move more than **£800 billion** across borders each year. Settlement delays and FX spreads cost **1-4%** of transaction value. SWIFT gpi, Open Banking, and stablecoin/regulated settlement rails are converging — creating an opportunity for a routing engine that selects the optimal rail per transaction.

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## Payment Flows

UK SME import/export trade relies heavily on:

| Rail | Share of SME Volume | Characteristics |
|------|-------------------|-----------------|
| SWIFT (correspondent banking) | ~60% | Reliable but slow (1-5 days), expensive FX spreads |
| Card networks (Visa/Mastercard) | ~20% | Fast authorisation, high merchant fees (2-3%) |
| Fintech PSPs (Wise, Revolut) | ~15% | Lower FX spreads, limited currency pairs |
| Open Banking / vPAY | ~5% | Fast, domestic-only, growing fast |
| Stablecoin / crypto rails | <1% | Near-instant settlement, regulatory uncertainty |

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## Costs

Research from the FSB and payment providers suggests SMEs pay **1-4%** in total cross-border costs:

| Cost Component | Typical Range |
|---------------|---------------|
| FX spread | 0.5% – 2.5% |
| Correspondent bank fees | £10 – £50 per payment |
| Intermediary bank charges | £15 – £75 per payment |
| Beneficiary bank receipt fee | £0 – £25 |
| Compliance/screening delays | 0 – 5 days |

A £10,000 payment can cost £100-£400 in combined fees and FX spreads. For SMEs making 20-50 cross-border payments per month, these costs are material.

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## Rails — Current State

### SWIFT gpi
- **Speed:** Same-day for 50% of payments; <24 hours for 90%
- **Tracking:** End-to-end payment tracking via UETR
- **Cost:** High — correspondent banking fees apply at every hop
- **Coverage:** Universal — 11,000+ institutions in 200+ countries

### Open Banking / vPAY
- **Speed:** Instant (Faster Payments) or near-instant
- **Cost:** Low — domestic rails, no correspondent fees
- **Limitation:** GBP domestic only; linked to individual bank accounts
- **Growth:** OBIE reports growth in payment initiation volumes

### Fintech PSPs (Wise, Revolut Business, Airwallex)
- **Speed:** Same-day to 72 hours
- **Cost:** 0.35% – 1.0% FX spread (much lower than banks)
- **Coverage:** 50-80 currency pairs, growing
- **Limitation:** Account-based; not always integrated into accounting/ERP

### Stablecoin / Tokenised Deposits
- **Speed:** Near-instant (blockchain settlement)
- **Cost:** Very low — network fees only
- **Limitation:** Regulatory uncertainty; limited GBP stablecoins; AML/KYC compliance overhead
- **UK outlook:** Bank of England and HM Treasury consulting on regulated stablecoin framework (2025-2026)

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## SME Pain Points

| Pain Point | Root Cause |
|-----------|-----------|
| Unpredictable costs | Intermediary bank fees appear after payment is sent |
| Slow settlement | Correspondent banking chains add days |
| Poor visibility | No end-to-end tracking for non-SWIFT-gpi payments |
| Complex reconciliation | Multiple PSPs, currencies, and fee structures |
| Compliance friction | AML checks cause delays; documents requested repeatedly |

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## SoVael Angle

Build a **routing engine** that selects the cheapest, fastest, compliant rail for each payment:

1. **Aggregate PSP quotes** — API integration with Wise, Revolut Business, Airwallex, and traditional banks
2. **Score each rail** — speed, cost, compliance overhead, currency pair support
3. **Route automatically** — select optimal rail and execute payment
4. **Track end-to-end** — provide SME with real-time payment status
5. **Reconcile automatically** — match payments to invoices, flag exceptions

The first step: expose savings opportunities by comparing an SME's current cross-border costs against fintech PSP alternatives. Many SMEs are unaware they're paying 2-4% when alternatives cost 0.5-1%.

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## Market Opportunity

- UK SMEs make ~300 million cross-border payments annually
- If 10% switch from traditional banking to lower-cost rails, annual savings exceed **£2 billion**
- SoVael captures value through platform subscription + per-transaction fee

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## Sources

- Federation of Small Businesses (FSB) — Cross-Border Payments Research 2025
- Bank of England / HM Treasury — Stablecoin and Tokenised Deposits Consultation 2025-2026
- Wise Business / Revolut Business / Airwallex — SME Pricing Pages
- SWIFT — gpi Adoption Statistics 2025

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*SoVael Finance Research Centre — Q2 2026*