“Payment Infrastructure and Pricing of Cross-Border Transfers: Evidence from Banks and Money Transfer Operators”
Abstract
Cross-border payment links connect national payment systems across borders. We exploit their staggered global rollout to study how payment infrastructure affects the pricing of cross-border transfers, focusing on the remittance market. Using the imputation estimator of Borusyak, Jaravel and Spiess (2024), we find that a single infrastructure shock produces opposing pricing responses from banks and money transfer operators (MTOs). Banks reduce fees by approximately 14% at impact, driven by lower FX margins. MTOs raise transfer fees by approximately 10% at impact; an offsetting decline in FX margins leaves total fees initially unchanged, but as the FX effect fades, total MTO fees rise to approximately 10% by four quarters after activation. The MTO fee increase varies across corridors: where banks have a larger market presence, MTO fee increases are substantially muted. The results have direct implications for the G20 target of reducing remittance costs below 3%: while CB links lower bank fees, the unintended increase in MTO transfer fees may offset these gains for customers who depend on non-bank providers, particularly in corridors where bank competition is absent.
BibTeX
@article{ES2026,
title = {Payment Infrastructure and Pricing of Cross-Border Transfers: Evidence from Banks and Money Transfer Operators},
author = {Christian Engels and Anna L. Sobiech},
year = {2026}
}
Accepted LAPE Finest Spring Workshop, June 2026