Businesses lose $9b annually to cross-border payment inefficiencies

FX spreads and settlement delays trap working capital in cross-border transactions.

Singapore businesses lose an estimated $9b (US$7b) in working capital each year due to inefficiencies in legacy cross-border payment systems, according to research by Airwallex and the Centre for Economics and Business Research (CEBR).

The study examined business-to-business (B2B) international payment frictions, including payment failures, foreign exchange spreads, correspondent banking fees, and slow settlement cycles.

It described the combined impact as a “Global Growth Tariff,” referring to the hidden costs created by inefficiencies in cross-border payment infrastructure.

Globally, the report estimated that these inefficiencies result in about $424.15b (US$330b) in working capital losses.

In Singapore, the study found that payment failures and related repair costs account for around $539.83b (US$420m) annually. 

It said non-straight-through processing transactions often require manual intervention, which increases costs across supply chains.

Foreign exchange spreads and correspondent banking fees were identified as the largest contributor, accounting for about $8.1b (US$6.3b) of the total impact in Singapore.

Slow settlement cycles were estimated to immobilise around $282.77m (US$220m) in working capital at any given time, reducing liquidity available for business use.

Airwallex said these inefficiencies stem from structural limits in legacy payment systems, including fragmented banking networks and slow processing times that reduce transparency and speed in cross-border transactions.

The report said Singapore’s role as a global trade and financial centre means it is more exposed to these frictions due to higher volumes of international payments.

CEBR senior economist Liam Daly said the findings point to persistent inefficiencies in cross-border payment systems that act as a drag on business activity.

He said in a highly connected economy like Singapore, these frictions lead to higher costs and reduced liquidity.

The analysis was based on payment failure rates, foreign exchange costs across major currency corridors and settlement times for international supplier and contractor payments, combined with publicly available cross-border transaction data.

Airwallex said it will release further findings in June, focusing on how the impact varies by industry and company size, including SaaS, tourism, and e-commerce sectors.