Conceptual Model for Evaluating Traditional Cross-Border Payment Systems and Bottleneck Identification

• Author(s): Babajide Oluwaseun Olaogun; Adaobu Amini-Philips; Ayomide Kashim Ibrahim
• Paper ID: 1711644
• Page: 108-126
• Published Date: 31-05-2018
• Published In: Iconic Research And Engineering Journals
• Publisher: IRE Journals
• e-ISSN: 2456-8880
• Volume/Issue: Volume 1 Issue 11 May-2018

Abstract

Traditional cross-border payment systems, predominantly based on correspondent banking networks and SWIFT messaging infrastructures, remain central to global financial transactions but are increasingly criticized for inefficiency, opacity, and high operational costs. This paper presents a conceptual model for evaluating such systems with the objective of systematically identifying inherent bottlenecks across operational, regulatory, technological, and cost dimensions. The model adopts a layered perspective, comprising inputs (originators, intermediaries, regulatory frameworks, and technological infrastructure), processes (messaging, compliance checks, foreign exchange conversion, and settlement mechanisms), and outputs (beneficiary receipt, reconciliation, and reporting). Evaluation dimensions include efficiency, cost, transparency, reliability, security, and scalability, allowing for multidimensional performance assessment. Bottleneck identification is addressed through a structured framework that highlights operational frictions such as multi-hop transactions, manual reconciliation, and legacy systems; cost drivers including intermediary fees and FX spreads; regulatory redundancies stemming from fragmented compliance standards and de-risking practices; and infrastructure limitations such as batch-based settlements and lack of real-time integration. The conceptual model contributes by offering a structured approach to analyzing the interplay between transaction flows, institutional practices, and regulatory environments that collectively shape the performance of traditional cross-border payment systems. Its application facilitates comparative assessments across geographies and use cases, providing insights into the differential impacts on retail remittances, trade finance, and corporate treasury operations. The identification of bottlenecks has direct implications for banks, regulators, policymakers, and end users, informing strategies for modernization, harmonization of compliance standards, and investment in technological upgrades. Ultimately, the model underscores the necessity of moving beyond incremental reforms toward more resilient, transparent, and inclusive cross-border payment ecosystems, while providing a diagnostic framework that can serve as a baseline for evaluating emerging alternatives such as real-time payment networks and distributed ledger-based infrastructures.

Keywords

Traditional Cross-Border Payments, Correspondent Banking, Payment System Evaluation, Bottleneck Identification, Transaction Delays, Cost Analysis, Operational Inefficiency, Transparency, Reliability, Risk Management, Compliance, Scalability, Accessibility, Interbank Settlements, Cross-Border Remittances

Citations

IRE Journals:
Babajide Oluwaseun Olaogun, Adaobu Amini-Philips, Ayomide Kashim Ibrahim "Conceptual Model for Evaluating Traditional Cross-Border Payment Systems and Bottleneck Identification" Iconic Research And Engineering Journals Volume 1 Issue 11 2018 Page 108-126

IEEE:
Babajide Oluwaseun Olaogun, Adaobu Amini-Philips, Ayomide Kashim Ibrahim "Conceptual Model for Evaluating Traditional Cross-Border Payment Systems and Bottleneck Identification" Iconic Research And Engineering Journals, 1(11)