Citi anticipates growth in cross-border payments during Q1 of 2025
In the rapidly evolving world of cross-border payments, traditional banks like Citi are adapting to stay competitive against fintech companies. In response to questions about the impact of trade tariffs, Fraser, a bank executive, highlighted potential challenges to the TTS segment.
Citi, however, expects to be busy facilitating cross-border trade flows and associated hedging and financing activity due to the trade tariffs. The bank's cross-border transaction flows represent 14% of deposits in the TTS unit, and in Q1 2025, these transactions increased by 5% year-on-year to $95.1 billion.
To compete with fintech companies, traditional banks are adopting faster payment networks and enhanced transparency tools. Banks are leveraging new global payment networks like SWIFT GPI, which enable real-time tracking and faster settlement, significantly reducing processing times. They are also exploring instant payment capabilities akin to fintechs and new infrastructures like FedNow for domestic instant payments in the U.S.
Banks are also working to improve their currency exchange offerings, addressing long-standing concerns about fees and currency exchange costs. Some banks are experimenting with crypto-friendly services to appeal to business and retail customers interested in seamless cross-border crypto payments.
In addition, banks are investing in AI-driven security measures and compliance technologies to match fintech capabilities, protecting transactions and customer data while maintaining regulatory standards in a complex global environment. Central bank digital currencies are also being monitored and prepared for integration to ensure banks remain relevant as the global payment ecosystem evolves.
Citi's response to these changes was not explicitly mentioned in the article, but the bank has been making strides in digital transformation. For instance, Citi Payments Express, the bank's digital commerce solution, is now live in 19 countries and has experienced 10x growth in volumes since Q4 2024.
The bank has also been using generative AI (GenAI) across the business for document production and analysis, FX trading fraud detection, code reviews, and automating high-priority manual reconciliations, including in the Services division.
Despite the economic turmoil caused by the trade tariffs, Fraser expressed confidence in the US's continued status as the world's leading economy and the dollar as the reserve currency. The bank's FY 2025 projections have not been revised, but they are subject to macro and market conditions, particularly the recent US trade tariffs.
Client engagement related to the trade tariffs is reportedly "off the charts," indicating a high level of interest and concern from Citi's clients. The bank has not revised its FY 2025 projections, but the impact of the trade tariffs on the bank's non-interest revenue, particularly a fee-related decline in Securities Services revenue, remains a concern.
In conclusion, traditional banks like Citi are adapting to the challenges posed by fintech competition and trade tariffs by adopting faster payment networks, enhancing transparency tools, improving currency exchange services, cautiously integrating crypto capabilities, leveraging advanced AI security, and preparing for next-generation payment instruments such as CBDCs. These efforts aim to deliver the speed, cost-effectiveness, and user experience that customers now expect in a digital-first global economy.
- Traditional banks like Citi are not only adapting to stay competitive against fintech companies by adopting faster payment networks and enhanced transparency tools, but they are also investing in AI-driven security measures and compliance technologies to match fintech capabilities.
- In addition to that, banks like Citi are working to improve their currency exchange offerings, exploring crypto-friendly services, and preparing for integration of Central Bank Digital Currencies (CBDCs), all with the aim of delivering the speed, cost-effectiveness, and user experience that customers now expect in a digital-first global economy.
