Bypassing correspondent banking is the practice of routing cross-border payments, or gaining access to payment systems, without depending on the traditional chain of correspondent bank accounts. Firms, banks and governments pursue it to cut costs and delays, to keep services running after correspondents withdraw, and sometimes for strategic reasons, such as reducing reliance on payment networks controlled by other countries.
In the conventional model, a payment abroad passes from the sender's bank through one or more banks that hold accounts for each other, known as a correspondent bank chain, with messages usually carried over SWIFT. Bypassing does not mean abandoning banks entirely. Most alternatives still settle in central bank or commercial bank money somewhere; they change who is connected to whom, and how many intermediaries sit in between.
Bypassing correspondent banking in plain terms
Imagine sending a parcel to a remote village with no direct delivery. It goes from your local post office to a regional hub, then to a national hub abroad, then to a local courier, and every hand-off adds a fee, a delay and a chance of loss. If a hub decides it no longer wants parcels from your town, nothing gets through at all.
Bypassing correspondent banking is the money equivalent of finding a direct route: a road straight between two towns' post offices, a shared depot used by several neighbouring countries, or a new kind of parcel that can travel on its own. Each route has its own rules and limits, but all aim to reduce the number of hand-offs.
Why firms and countries look for alternatives
The main push has come from de-risking. Data from the BIS Committee on Payments and Market Infrastructures show that the number of active correspondent relationships worldwide fell by about a quarter between 2011 and 2020, leaving some domestic banks in small economies with one or no dollar correspondent. Each link in a chain also adds fees, foreign exchange margins, cut-off times and compliance checks, which is why the G20 adopted a roadmap in 2020 to make cross-border payments cheaper, faster and more transparent. Geopolitics adds a further motive: countries exposed to sanctions or worried about them have invested in networks outside Western control.
Main routes
- Direct access for non-banks. Some central banks let licensed payment firms hold settlement accounts. The Bank of England opened its RTGS system to non-bank payment service providers in 2017, and the EU's Instant Payments Regulation amended the Settlement Finality Directive so that payment and e-money institutions can join designated payment systems. A firm holding a payment institution licence can then settle domestic legs itself and hold local balances in many countries, so that most transfers never cross a border at all.
- Linked fast payment systems. Countries connect their real-time payment systems directly. India's Unified Payments Interface (UPI) and Singapore's PayNow were linked in February 2023. Project Nexus, designed by the BIS Innovation Hub to connect many such systems through one hub, is being taken forward by Nexus Global Payments, set up in Singapore in 2025 by the central banks of India, Malaysia, the Philippines, Singapore and Thailand.
- Regional platforms. The Pan-African Payment and Settlement System (PAPSS), launched commercially in January 2022 by Afreximbank and the African Continental Free Trade Area Secretariat, lets payments between African countries settle in local currencies. Europe's Single Euro Payments Area (SEPA) removes the need for correspondents within the euro area.
- Alternative currency networks. China's Cross-Border Interbank Payment System (CIPS), launched in 2015, clears renminbi payments, with indirect participants reaching it through direct members.
- Stablecoins and tokenized money. Dollar stablecoins on public blockchains allow value to move between wallets around the clock; see stablecoin payments. Conversion back into local currency still needs banks or licensed exchanges at each end.
- Central bank digital currency platforms. mBridge, a multi-CBDC platform for wholesale central bank digital currency payments, reached a minimum viable product in 2024. The BIS left the project in October 2024, and it continues under the central banks of China, Hong Kong, Thailand and the United Arab Emirates. Saudi Arabia's central bank said in 2026 that it had stopped participating after completing a proof of concept in May 2025.
Limitations and risks
Every alternative reaches only part of the world. Linked fast payment systems cover the countries that have signed bilateral or hub agreements, regional platforms stop at regional borders, and CIPS is concentrated on renminbi flows. Non-bank direct access usually covers domestic schemes only, so a firm still needs a bank to buy foreign currency in bulk, fund nostro balances or pay in countries where it holds no licence.
Compliance obligations do not disappear. Payment institutions, stablecoin issuers and platform operators remain subject to anti-money-laundering, sanctions and FATF Travel Rule requirements, and regulators have warned that routes designed mainly to avoid scrutiny can raise rather than reduce risk. Stablecoins add issuer, redemption and wallet custody risks, and many countries restrict their use for payments.
Relationship with correspondent banking
In practice, most large flows still pass through correspondent banks, and many of the new routes depend on them at some point. Correspondent banks have also responded to the competition, for example through SWIFT's gpi tracking service, which shows where a payment is along the chain, and through bank-run instant cross-border services. The alternatives are best seen as competitors and complements that reduce dependence on any single chain, rather than as a full replacement.