Global payment systems are fragmenting. Here’s what the G20 can do.

The global economy is stitched together by cross-border payments. A functioning international payment system is the indispensable backbone of global trade, capital flows, and remittances. While estimates of the total value of cross-border payments vary substantially, an eye-opening IMF working paper finds that cross-border payments in 2024 were equivalent to nearly one quadrillion US dollars. To move these substantial sums, a patchwork of public and private actors—including national governments, central banks, private financial institutions, technology firms, and international institutions—work in concert to supply the infrastructures, services, and assets needed to move money. While these actors and systems have helped to ensure efficient and safe global payments over the last several decades, new technologies and political dynamics are changing the equation. From the explosive emergence of cryptocurrencies to the increased prevalence of financial sanctions and economic statecraft, the payments landscape is in the midst of transformational change.

In this new environment, seemingly all actors agree that the global payment system is fragmenting. The IMF argued that “the global payment system is being reshaped in ways few could have imagined a decade ago.” A member of the governing board of the European Central Bank (ECB) claimed that geopolitical and technological dynamics “could lead to further fragmentation of global payment systems.” McKinsey found in its 2025 global payment systems report that “the forces driving fragmentation are already in motion.” Atlantic Council experts indicated that “uneven and dispersed technological advancements in digital currencies could actually create further fragmentation.” What’s clear is that nearly all the states, bureaucracies, and firms that enable the movement of money across borders think that payment systems are fragmenting.

But what, specifically, is meant by payment system fragmentation? What is driving it? And what might the international community do to mitigate the harm of fragmentation and achieve the benefits of interconnectedness? Ahead of this year’s Group of Twenty (G20) convenings, this brief is intended to drive actionable dialogue among key constituencies regarding payment system fragmentation. The brief offers a definition of payment system fragmentation and discusses its consequences, including for end users and global financial stability. It then turns to four unique drivers of fragmentation—markets, technology, regulations, and geopolitics—before concluding with a discussion of the G20’s critical role.

The G20 Roadmap for Enhancing Cross-Border Payments was launched in 2020 to address long-standing frictions in cross-border payments, including high costs, low speeds, limited access, and insufficient transparency. The roadmap focuses on three themes: payment system interoperability and extension, regulatory and supervisory frameworks, and data exchange and messaging standards. To track progress toward its goals, the G20 endorsed a series of quantitative performance indicators that are measured at the global level each year. The most recent stocktaking reveals mixed results: Substantial progress has been made developing and implementing various technical standards, though improvements for end users have been harder to find. When viewed through the lens of fragmentation, the G20 roadmap is an attempt to encourage interconnection and interoperability through the establishment of shared global standards, thereby reducing key frictions. With the process coming to a conclusion in 2027, this paper aims to drive dialogue around subsequent G20 efforts to build a better global payment system.

The fragmentation of global payment systems and the consequences

Payment system fragmentation refers to changes in payment systems that reduce cross-border interoperability. What specifically is fragmenting might include regulatory frameworks, technical standards, liquidity pools, settlement assets, or other aspects of the international payment system. When different jurisdictions develop different practices across these and other dimensions of cross-border payments, sending money across national borders may become costlier, slower, and less transparent, as the G20 outlines in its roadmap. Despite these negative consequences, certain forms of fragmentation may be a byproduct of innovation, an inevitable, transitory step on the path toward a better global payment system. In this section, I explore both the risks and the opportunities posed by this process of fragmentation.

Fragmentation in wholesale, retail, and remittance payments may be accompanied by numerous negative consequences, including for end users, global financial stability, and global economic and financial integration. End users in corridors characterized by high frictions in retail and remittance payments may experience higher cost, lower speed, and financial exclusion. As the recently published Financial Stability Board (FSB) progress report attests, international efforts to address these frictions “have not yet translated into tangible improvements for end-users at the global level.” The creation of alternative payment systems also presents risks for end users. An IMF staff discussion note argues that “parallel and competing infrastructures could lead to loss of network effects and interoperability across borders.” If the usefulness of a given payment system increases as the number of users increases, then those same systems become less useful as new, competing systems siphon away users.

From a macro perspective, payment system fragmentation may generate novel risks to global financial stability. It might complicate liquidity management, trigger capital flight, and reduce the global financial system’s resilience to shocks and crises. Beyond these risks to global stability, this fragmentation may also threaten national monetary sovereignty. Consider the potential impact of stablecoins, a form of cryptocurrency that is pegged to a fiat currency. US dollar-backed stablecoins may help meet consumer demand for dollars while addressing complaints about fees, speed, and access to cross-border payments. But widespread adoption of stablecoins would be akin to dollarization, a potential challenge to monetary sovereignty.

Yet another risk of payment fragmentation is negative feedback. That IMF Staff Note, for example, defines negative feedback as the various ways in which payment fragmentation might drive other forms of economic and financial fragmentation, particularly in trade. According to the World Bank, trade as a percent of global gross domestic product (GDP) was lower in 2024 than it was in 2006, when the trend line began to flatten. Growth in trade appears to have slowed or begun to reverse. Fragmented payment systems may weaken global trade, slowing growth or contributing to its contraction. For instance, if rival geopolitical blocs embrace competing payment systems that are not interoperable, then the shift toward intraregional trade may accelerate. Similar dynamics might play out in the financial system.

While some official and private actors have focused on the negative consequences of fragmentation, it is important to consider the ways in which appropriately managed fragmentation may drive positive results. The G20’s focus on cross-border payments highlights the extent of public dissatisfaction with existing systems. If existing services are inadequate, and if we assume that fragmentation entails some degree of innovation and competition, then fragmentation may be viewed as a step toward a future global payments system that better addresses the needs of various groups. For example, one senior payments executive is quoted by The Economist as saying that competition has driven substantial improvements at SWIFT, which “has become notably less clunky to use in recent years,” while reducing transaction fees. But it is in such a moment of transition that the risks discussed above are most acute. To manage this process of fragmentation, it is important to understand its root causes, which are discussed in the following section.

What drives fragmentation?

Payment system fragmentation is both an unintended consequence of changes in the payments landscape and an intentional policy choice. As discussed above, the introduction of new services, settlement assets, or infrastructures may contribute to fragmentation and create new frictions in the payments landscape. On the other hand, fragmentation can be a policy choice when new systems are designed to be non-interoperable with legacy systems.

It is important to distinguish between these forms of fragmentation because they demand distinct policy responses. Where fragmentation is caused by natural changes in the payments landscape—like the introduction of new services and settlement assets—the job of the G20 and other policymaking bodies may be to foster innovation while limiting the potential harms caused by extreme fragmentation. This requires walking a middle path between concentration and innovation. Where fragmentation is a deliberate policy choice, policymakers must engage on the underlying conflicts that threaten to erode global economic interconnectedness. 

To better understand payment system fragmentation and the various policy responses it might demand, this section explores four drivers of fragmentation: markets, technology, regulation, and geopolitics. While these are discussed as distinct drivers, it is important to note the various ways in which they interact. Geopolitical dynamics drive technological development. Technological change demands new regulations. Regulations shape market outcomes. And so on. Better understanding these dynamics will be an important task for future analyses.

How markets drive fragmentation

Market characteristics are a critical driver of payment system fragmentation. Put plainly, different markets require different approaches to cross-border payments. The business models, regulations, and technologies that work in one payment corridor may not be successful in another, producing an inevitable divergence. Amid the drive toward global standards, recommendations, and guidelines, policymakers must bear in mind the important differences between cross-border payment corridors. 

For instance, variation in payment corridor volumes is responsible for some of the frictions and fragmentation occurring in global payments. Corridors connected to small states and island nations, for instance, process a low volume of transactions given the small populations of these countries. The Global Partnership for Financial Inclusion found that “65 percent of the Small States corridors had an average cost lower than 10 percent in Q1 2024, compared to 81 percent in other corridors.” Critically, this report further found that even digital services were substantially more expensive in these contexts. Frictions here are a product of market fundamentals, not technological or regulatory inadequacies. Beyond transaction volumes, disparities in technological infrastructure, institutional capacity, and access to capital mean that some countries simply lack the resources to adopt new payment standards or build interoperable systems, deepening market-driven fragmentation.

Market drivers of fragmentation interact with regulatory changes in important ways. For example, fragmentation in the correspondent banking network was driven in part by the increased cost associated with regulatory compliance. Correspondent banking relationships enable banks in different countries to transact with one another, forming the foundation of global trade, finance, and remittances. As compliance costs increased, banks severed ties with less profitable correspondent links, particularly those in smaller states with lower volumes. In the Caribbean, the decline in correspondent banking relationships as a result of “derisking” contributed to fragmentation in payments to and from the region. Despite these challenges, innovative solutions exist. For instance, an Atlantic Council report proposed that Caribbean Island states might “create a regional grouping or mechanism that pools transactions to a size that is profitable for bigger correspondent banks.”

How technology drives fragmentation

It is not a coincidence that discussions of payment system fragmentation have intensified during a period of profound technological innovation. While technology may promise to reduce cross-border frictions and increase interoperability, that future is neither guaranteed nor imminent. In the short term, policymakers must contend with a range of new services, assets, and infrastructures, many of which threaten to disrupt legacy payments infrastructure. To illustrate the ways in which technology drives fragmentation, I will briefly consider two examples: stablecoins and data standards.

In many countries, companies and governments are rushing to issue and develop rules for stablecoins in anticipation of widespread adoption. In the United States, the GENIUS Act of 2025 established a regulatory framework for stablecoins backed by the US dollar, which currently comprise 99 percent of the global stablecoin market. While many observers have argued that stablecoins might ease cross-border payment frictions, others have pointed out that stablecoins may contribute to fragmentation. For instance, fragmentation in money and wallet acceptance may increase if many different stablecoins become commonly used in cross-border transactions. Stablecoins offer promising solutions to certain cross-border problems but are not without challenges.

As with stablecoins, data standards may enable integration while threatening fragmentation in the short term. ISO 20022 is a messaging standard for financial transactions that provides a common, structured data format that can be used in cross-border transactions. In a report on ISO 20022 harmonization, the Bank for International Settlements (BIS) argues that “incomplete or inconsistent implementation of the minimum data model could lead to further fragmentation and limit interoperability.” Technological standards that are unevenly adopted may be drivers of fragmentation, underscoring the importance of rapid, synchronous adoption. Under certain conditions, adoption of new technologies or technological standards can be done quickly at the national level. For instance, Brazil’s Pix payment system and India’s Unified Payments Interface (UPI) both achieved widespread adoption within years of launch. Rapid adoption can increase risks—the launch of Pix was accompanied by an increase in fraud—and run counter to the goal of harmonized global payments, but these examples show that rapid adoption is possible.

How regulation drives fragmentation

In its 2025 report to the G20, the FSB argued that regulatory misalignment constituted one of the “persistent challenges that impact cross-border payments.” In some areas of regulation and supervision, standards have only recently been developed. Prior to the publication of FSB standards in 2024, there were no comprehensive recommendations on the regulation and supervision of nonbank payment-service providers (PSPs) engaged in cross-border payments, resulting in a fragmented regulatory landscape that was an “obstacle” to better cross-border payments. After the FSB published standards in 2024, many jurisdictions moved to develop nonbank PSP regulations and provide them with access to national payments systems, which could increase innovation and competition. The recent The Committee on Payments and Market Infrastructures (CPMI) survey suggests that nonbank payment system access might double over the next several years, showing how standards can support global action. 

While standards may drive convergence in national approaches to regulation over the medium term, they may also present short-term challenges. As with technology, inconsistent and asynchronous adoption of new regulations has produced a fragmented landscape, one that is challenging for firms in the payments space to navigate. Consider the Financial Action Task Force’s Travel Rule, which outlines what information must accompany a payment across national boundaries. Payment service providers in jurisdictions that have adopted the rule may be unable to comply when transacting with noncompliant jurisdictions. Countries have also adopted different value thresholds to determine when the Travel Rule applies. Where small regulatory differences can create major interoperability fault lines, fragmentation will continue. Absent regulatory clarity, private-sector actors may see limited upside to investing in interoperability or adoption of common standards.

While updated and harmonized regulations can reduce fragmentation, overly burdensome rules might drive it. The decline in correspondent banking relationships is among the clearest examples of fragmentation driven by regulatory change. While this network remains a critical component of cross-border payments, the number of active correspondent relationships declined by 20 percent in the decade following 2011. The fragmentation of the global correspondent network is driven in part by changes in regulations and the costs of compliance. In an FSB survey, many banks indicated that active correspondent connections were severed due to the costs of due diligence. Countries with inadequate or questionable anti-money laundering/countering the financing of terrorism regimes lost more connections compared to other countries. This case demonstrates that changing regulatory standards—as well as changing risk appetites on the part of banks—can drive fragmentation.

How geopolitics drives fragmentation

In recent years, payments rails have become a potent political tool. The United States has used its control over various payments infrastructures—including the central role of US financial institutions in the correspondent banking network and its influence at SWIFT—to threaten its adversaries with exclusion from large swaths of the global financial system. In response to Russia’s invasion of Ukraine in 2022, Russian financial institutions were excluded from the SWIFT messaging network, complicating the process by which those institutions cleared cross-border payments. These dramatic events underscore the reality that payment systems are not geopolitically neutral infrastructures but rather important strategic assets in a world of increasing political tensions.

Many actors are pursuing alternative systems to reduce the risks posed by payment system weaponization. Russia’s financial messaging network (known by Russian abbreviation SPFS) was developed after Russian assets were frozen and Russian financial institutions were excluded from SWIFT. China’s Cross-Border Interbank Payments System was created to reduce the risks posed by payments system weaponization, which China’s officials viewed as an economic “nuclear weapon.” Beyond these new clearing and settlement systems, geopolitical considerations have accelerated CBDC development in jurisdictions that wish to reduce dependence on the US dollar-based system. The Atlantic Council’s CBDC Tracker found that cross-border wholesale CBDC projects have more than doubled since sanctions were imposed on Russia following its invasion of Ukraine. While these alternative systems are largely inchoate, they represent a widely held view that new systems are an effective means of hedging against the risks posed by geopolitics. Even small shifts away from the dollar and dollar-based systems are significant because they demonstrate both the demand for and the feasibility of alternative arrangements.

Not only has geopolitics driven the creation of new systems but also bias in patterns of integration. Interlinking fast payment systems allows PSPs operating in one jurisdiction to transact with PSPs in another jurisdiction without going through a correspondent bank. Bilateral interlinkages, such as the Thailand-Singapore corridor, have proven to reduce costs and settlement times. Multilateral initiatives like the EU’s TARGET Instant Payment Settlement system can provide fast payments across borders that are settled in multiple currencies. While interlinking is largely a positive development for cross-border payments, scholars find compelling evidence that geopolitical closeness is a primary driver of existing connections. If such trends hold, the fragmentation of payment systems into geopolitical blocs becomes more likely.

Building a better global payment system

Addressing these drivers of payment system fragmentation is no easy task. The splintering of global payments is caused by different forces—market characteristics, regulatory and technological change, and geopolitics—each of which may require different solutions. In this section, I briefly discuss existing multilateral initiatives intended to alleviate frictions and consider a way forward for the G20.

Existing initiatives

Meeting the ambitious targets outlined in the G20 roadmap demands domestic action: building a better global payment system requires building better domestic payment systems. Toward that end, the IMF and the World Bank have allocated more resources to technical assistance and surveillance activities in support of better cross-border payments. Critically, both institutions have adopted longer-term perspectives, focusing technical assistance not only on immediate needs outlined in the roadmap but on emerging issues like CBDG and crypto-asset regulations. Their flexible, demand-driven approaches will help ensure that technical assistance continues to meet the needs of recipients even as payment systems continue to change. Further, focusing technical assistance on high-cost corridors may help address market-driven forms of fragmentation.

While the IMF and the World Bank work to support national projects, the BIS is leading several multilateral initiatives to improve cross-border payments. Led by the BIS Innovation Hub Singapore Centre, Project Nexus is a multilateral platform designed to connect domestic instant payment systems across countries through a single standardized connection, rather than unique linkages for each individual corridor. Central banks in India, Malaysia, the Philippines, Singapore, and Thailand committed in 2024 to move toward live implementation, an important first step of which was the establishment of the Nexus Scheme Organization to manage the system. Implementation is set to begin in 2026.

While Project Nexus aims to improve cross-border retail and remittance payments, Project Agora explores the feasibility of tokenizing wholesale cross-border payments. The project is led by the BIS in partnership with seven central banks (France, Japan, Mexico, South Korea, Switzerland, the United Kingdom, and the United States) and a large group of private financial institutions led by the Institute of International Finance. The project probes the feasibility of integrating tokenized central bank money and tokenized commercial bank deposits on a unified, programmable ledger. While preliminary results have not yet been shared publicly—a comprehensive report is expected in 2026—Agora will help policymakers better understand the opportunities and challenges posed by tokenization and a unified, multilateral platform.

Apart from these multilateral initiatives, bilateral initiatives to improve cross-border functionality have accelerated in recent years. In 2021, Thailand and Singapore connected their fast payment systems, resulting in instant and cheap payments. India’s UPI national payment system is now connected to national payment systems in Singapore and the United Arab Emirates, enabling real-time cross-border payments. The ECB is exploring linkages with India’s UPI system. Such bilateral linkages improve efficiency in certain corridors and demonstrate the feasibility of frictionless cross-border payments. But an ad hoc, bilateral approach to cross-border payments risks creating a “digital spaghetti bowl of complex, partially interconnected networks.” Bilateral projects must be supplemented by robust, inclusive multilateral initiatives to prevent exclusion and fragmentation; absent multilateralism, national or bilateral initiatives may deepen fragmentation.

Way forward for the G20

Building better global payment systems requires many actors working in concert; however, the G20 plays an indispensable role. Collectively, G20 countries comprise 80 percent of global GDP and issue all major global reserve currencies. As the premier forum for global economic cooperation, the G20 leads ambitious efforts—for example, coordinating the response to the Global Financial Crisis—and oversees international organizations like the Financial Stability Board. And the G20 has been at the forefront of multilateral efforts to address cross-border payment challenges, namely the G20 roadmap process. With the roadmap’s 2027 deadline quickly approaching, where might the G20 turn next? In this section, I consider this important question and make four suggestions regarding the role of G20. They are offered to drive dialogue and debate among key constituencies regarding payment system fragmentation.

The G20 should shift its focus from technical standards and guidelines to the politics of implementation. A December 2025 BIS Bulletin argues that “the primary near-term focus should be on implementing current priorities at the jurisdiction level, rather than developing additional international policy, guidance or recommendations.” Where national-level implementation of the roadmap is appropriate and productive, how might the G20 best support such action? First, it must continue to wholeheartedly support technical assistance provided by the international financial institutions (IFIs). Such work should continue to target jurisdictions that lack the necessary resources and suffer most from payment system fragmentation.

Second, the G20 must do what it can to incentivize action on behalf of central banks and national governments. To consider one example, the CPMI’s most recent survey notes “limited uptake of priority actions” among real-time gross settlement systems, suggesting a need to engage central bank payment system operators. As a forum of sovereign states that lacks a permanent secretariat or enforcement mechanism, the G20 can only do so much, but its ability to apply reputational pressure on noncompliant or partially compliant actors might be leveraged more effectively. International relations scholarship suggests that reputational pressure might drive compliance under specific conditions. Creative solutions are needed. For instance, while recent cross-border payments stocktaking by the CPMI and FSB generally avoid discussing individual countries, shining light more directly on jurisdictions that are excelling and those that are falling behind might spur action and facilitate aid where it is needed.

G20 delegates should engage with the weaponization of global payment systems. Failing to do so risks leaving a profound driver of fragmentation entirely unaddressed. The G20 is among the only forums in which geopolitical tensions and payments infrastructure can be discussed in tandem. The IFIs assess the risks posed by geopolitical tensions, but they generally avoid explicit discussion of politics or international security. While some G20 delegates have historically resisted mixing economic and security agendas, the deepening entanglement of payments systems with geopolitical competition makes continued avoidance increasingly untenable. As a political forum, the G20 should prioritize discussion of the geopolitical drivers of fragmentation in the short term. Over the longer term, taking steps toward general, shared principles regarding the weaponization of financial infrastructure would be a useful and ambitious objective. Experts have observed that “a new framework for the use of the tools of economic statecraft” is needed.

The G20 should continue to engage a wide range of interested actors, including the private sector and nongovernmental organizations. For example, the G20 should pursue substantive and sustained engagement on payment issues with both the Think 20 and Business 20, which are engagement groups of the G20. Only through such an approach can the G20 and key policymakers stay informed of cutting-edge developments in technology and markets. While national governments and central banks are critical participants in building the future of money and payments, much of the innovation takes place among private actors, underscoring the importance of their continued participation in multilateral dialogue around cross-border payments. Adding new voices to the G20—including those at the forefront of payment system innovation—will help policymakers keep an eye on the future.

The G20 and the IFIs should resist the urge to claim victory. Modest progress across a range of indicators should be celebrated. ISO 20022 adoption is progressing nicely, legal and regulatory reforms are proceeding, and bilateral and multilateral initiatives are demonstrating what might be possible in cross-border payments. But much work remains to be done. All indicators have not yet been achieved; certain payment corridors, for instance, remain slow, expensive, and opaque. Focused work to improve performance in these specific corridors should be a major focus going forward. Beyond addressing specific high-friction corridors, the G20 must continue to drive multilateral solutions to cross-border payments. Avoiding a tangle of inconsistent national, bilateral, and regional systems requires global leadership that the G20 is uniquely able to provide.

Given the swift rate of change in cross-border payments, the G20 must remain vigilant. New technologies, regulations, market characteristics, and geopolitical dynamics will continue to drive change in cross-border payments, leading to both fragmentation and unification. The G20 and the IFIs must do what they can to stay informed of these developments and nimbly respond as the payment ecosystem evolves. A key step in this process is ensuring continuity between the United States and the UK presidencies as well as committing to cross-border payments as a priority issue beyond the roadmap’s 2027 deadline.

Greg Brownstein is an international relations PhD student at George Washington University, where he researches global economic governance and economic statecraft. He was a 2023 Bretton Woods 2.0 Fellow with the GeoEconomics Center. He was previously the Deputy Director of the Bretton Woods Committee and holds a masters in international economics from the Johns Hopkins School of Advanced International Studies.

This report was made possible in part by a grant from Mastercard.

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This report is written and published in accordance with the Atlantic Council Policy on Intellectual Independence. The authors are solely responsible for its analysis and recommendations. The Atlantic Council and its donors do not determine, nor do they necessarily endorse or advocate for, any of this report’s conclusions.

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Image: President, European Central Bank Christine Lagarde(2L) and Governor, Bank of Italy Fabio Panetta(2R) during a session about The Future of Cross-Border Payments in frame of 2024 WB/IMF Annual Meeting, today on October 22, 2024 at IMF Headquarters in Washington DC, USA. (Photo by Lenin Nolly/Sipa USA)