Speed and ease of use are important for payments to be efficient. Apart from instant payments like Swish, payments between Sweden and the euro area generally function as smoothly as payments within Sweden. Payments to other countries, however, are often slow and expensive.

The internet, digitalisation and new joint standards have contributed to decreasing the actual costs for sending money abroad. Moreover, competition has probably improved as new institutions have begun to offer faster and cheaper payments. There are now more services where the consumer can simply compare the costs of different payment alternatives (see, for instance, Konsumenternas, Money from Sweden and Monito).

Challengers on the market for cross-border payments

Sending money within Europe is much faster and cheaper than payments to other countries. If, for instance, one wants to send money via one’s Swedish bank to a bank account in Mexico, it is not unusual for it to take two days. The reason is that the Swedish banks do not have direct access to those countries’ payment infrastructures. The Swedish bank must then rely upon a network of bilateral agreements between banks in different countries, known as correspondent banks. These agreements are usually based on one bank (the correspondent) holding deposits owned by another bank (the respondent) and performing payments and other services on behalf of the respondent bank. It can also become expensive with the exchange rate mark-up and fees.

In recent years, new payment institutions have begun to offer fast and cheap services for cross-border payments. This is possible when the institution is active in both the sender’s and the recipient’s countries. Each individual payment can be managed by the institution increasing its balance in the sender country’s currency and reducing its balance in the recipient country’s currency. This means that the institution does not need to move liquidity and use the correspondent bank system for each individual payment, and the payment can therefore be made quickly. Often the institutions can also match the customers’ payments in various currencies, for instance, matching payments in Swedish krona-Mexican peso with payments in Mexican peso-Swedish krona, so that the total volume of liquidity needed to be moved between the different currencies is less.

Usually, cross-border payments are strongly dependent on the individual countries’ domestic payment systems. As the domestic payment systems have been upgraded and become faster in several countries, cross-border payments have also become faster and cheaper (see, for instance, RIX further developed to meet future needs).