Cross-Border Payments Face Delays Due to Capital Controls, IMF Finds

Moving money across borders is still far slower than it should be. Even as technology improves and global institutions push for faster systems, international payments often take hours or even days to complete. A new study by researchers from the International Monetary Fund and Swift highlights an important reason behind this problem: capital controls may be slowing things down at the very last step.

The research focuses on the "last mile" of payments, the stage after money reaches the recipient's bank but before it is credited to the person or business. While earlier parts of the payment journey have become faster and more efficient, this final step remains a major bottleneck.

What Happens in the "Last Mile"

When money is sent across borders, it goes through several stages. It starts with the sender's bank, travels through the global financial network, and finally reaches the receiving bank. But the process does not end there. Before the recipient gets access to the funds, the receiving bank must complete checks and approvals.

This is where delays often happen. Banks may need to verify details such as the purpose of the payment, confirm identities, and check supporting documents like invoices or contracts. If anything is missing or unclear, the process can slow down significantly.

The Role of Capital Controls

Capital controls are rules set by governments to manage the flow of money into and out of a country. They are used to protect economies from sudden financial shocks or unstable capital movements. While these controls serve important purposes, they also add extra steps to the payment process.

The study finds that these additional checks can cause noticeable delays. In countries with stricter capital controls, payments tend to take longer to reach the final recipient. On average, higher levels of restrictions can add four to eight hours to the process.

This delay may not sound large, but in a world aiming for near-instant payments, it is significant. For businesses waiting on funds or individuals relying on remittances, even a few extra hours can matter.

Bigger Impact in Developing Economies

The effect of capital controls is not the same everywhere. The study shows that emerging and developing economies are hit the hardest. These countries already face challenges such as less developed financial systems and slower administrative processes. When capital controls are added, the delays become even longer.

In contrast, advanced economies are better equipped to handle these requirements quickly. Their systems are more efficient, and compliance processes are often smoother. As a result, capital controls have little or no noticeable impact on payment speed in these countries.

There are also regional differences. Some regions experience stronger delays linked to capital controls, while others show weaker effects. However, the overall trend remains clear: more restrictions usually mean slower payments.

Technology Helps, But Not Enough

One might expect digital technology to solve this issue. And it does help to some extent. Countries with better digital systems and infrastructure generally process payments faster.

However, the study finds that technology alone cannot overcome the delays caused by capital controls. Even in highly digital systems, banks still need to follow regulatory rules that require checks and approvals. These processes often involve human judgment and cannot be fully automated.

A Trade-Off for Policymakers

The findings highlight an important trade-off. Capital controls can help protect economies and maintain financial stability. But they also create friction in payment systems, slowing down the movement of money.

As global efforts continue to improve cross-border payments, policymakers may need to balance these goals more carefully. Simplifying procedures, improving coordination, and using smarter technology could help reduce delays without weakening oversight.

The study makes one thing clear: speeding up global payments is not just about better technology. It is also about better rules.