How banks can reclaim cross-border payments

Key insight: Peer-to-peer payment apps have transformed into all-in-one payment hubs and are now the preferred method for cross-border transactions. 
What's at stake: Because consumers are leaving their funds stored within these nonbank applications, banks are facing fragmented deposit distribution and diluted customer capture.

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Peer-to-peer (P2P) payment app platforms are transforming cross-border payments by outpacing traditional banks and remittance services as the preferred option, pressuring financial institutions to modernize their offerings or risk disintermediation, according to a survey from American Banker's Market Intelligence team. 

As P2P apps evolve into all-in-one payment hubs, 46% of U.S. consumers who send money internationally now default to these apps for international transfers compared to just 6% using specialized remittance providers.

This article is the third and final installment of our three-part series examining the niche nature of digital payments and currency, and what could drive broader consumer adoption. It builds upon our first report on P2P friction and our second report on digital currency usage and understanding, drawing from a May/June survey of 1,000 U.S. consumers conducted by the American Banker Market Intelligence team.

In a global remittance market projected to reach $132.18 billion by the end of 2026, the behavioral shift extends beyond lost cross-border fee revenue. It poses a structural challenge to bank deposits: nonbanks aggregate consumer balances into select partner corporate accounts, fragmenting deposit distribution, diluting customer capture, and changing liquidity composition as consumers increasingly leave funds stored directly within these apps. 

Backend infrastructure upgrades alone are not enough; financial institutions must actively educate account holders about these capabilities within their existing bank apps.

American Banker Market Intelligence Team's Survey Data

In May and June, American Banker's Market Intelligence team surveyed 1,000 U.S. consumers to gauge their payment habits and how they engage with certain types of technology. We sought to better glean the average consumer's perception, understanding, and usage of nontraditional payment products; this includes on-chain technology like cryptocurrencies and stablecoins, specifically as a payment mechanism, and digital peer-to-peer payment apps by well-known nonbanks. The data revealed that cross-border money moves primarily on P2P apps, not on remittance specialists.

The role of P2P apps as the default "rail"

P2P payment apps emerged as the dominant method, selected by nearly half of respondents. Traditional banking drop in usage, with direct bank account transfers, wire transfers, and bank international transfer features all falling under 20% in usage. Alternative payment methods see even lower usage, including app-based remittance services like Wise and Remitly, crypto transfers, mailing paper checks, mailing cash, and stablecoin transfers.

When broken down by P2P app preference, PayPal and Cash App lead overall across P2P users at 35% and 28%, respectively. However, cross-border payment habits drive distinct shifts in platform selection. PayPal remains the clear favorite across both segments, preferred by 38% of international senders and 34% of non-senders. Conversely, traditionally domestic-oriented platforms see diminished appeal among international senders, who are significantly less likely to favor Venmo (7% vs. 14%) and lean less toward Zelle (11% vs. 15%) compared to non-senders.

While PayPal and Cash App remain the most popular platforms, user preferences diverge significantly based on transfer habits. Cross-border senders show a strong inclination toward globally integrated solutions such as PayPal and Apple Pay, whereas domestic-only senders favor bank-connected networks like Zelle and Venmo (this makes sense since Zelle is domestic only, and Venmo has primarily been for domestic P2P and P2B payments). Statistical analysis confirms that international senders are significantly more likely to prefer Apple Pay and less likely to prefer Venmo compared to domestic senders, highlighting that native ecosystem integration and cross-border functionality are key factors in shaping P2P app loyalty.

Across all ten evaluated pain points, consumers who send money across borders are more likely to regularly encounter P2P issues compared to domestic-only users. The top complaints overall relate to cost and operational friction; led by instant transfer fees (53% for international senders vs. 26% for non-international) and higher-than-expected transfer fees (44% vs. 18%), followed closely by cumbersome identity verification requirements (43% vs. 15%) and multi-day delays (42% vs. 17%). The disparity is especially acute in risk and error categories: international senders are roughly four to eight times more likely to report uncertainty about payment delivery (41% vs. 10%), restrictive transfer limits (39% vs. 9%), misdirected funds (32% vs. 4%), and scam encounters (30% vs. 5%), underscoring how cross-border functionality magnifies cost, reliability, and security hurdles in consumer payment networks.

Demand for cross-platform interoperability

These senders are also the group most exposed to interoperability problems.

Consumers who execute cross-border transactions, whether frequently or occasionally, show the highest demand for open networks, though a sizable majority of domestic-only senders also support interoperability. Overall, closed-loop payment systems create friction for most active users, with younger cohorts and international senders placing the greatest premium on open, connected payment rails.

When examined from a demographic and behavioral lens, cross-border money movement is heavily bidirectional, with 80% of international senders also receiving funds from abroad, compared to just 10% of non-senders. Demographically, senders skew younger, male, and employed: nearly three-quarters (74%) are Gen Z or Millennials (vs. 40% of non-senders), nearly two-thirds (63%) work full-time (vs. 34%), and 61% are men (vs. 44%). Furthermore, international remittance habits strongly correlate with digital asset adoption, with more than half of cross-border senders (52%) holding cryptocurrency, over triple the rate found among non-senders (16%).

Key features that would encourage employed cross-border money senders to receive their wages in digital currency include: instant access to earned wages instead of waiting for traditional paydays (32%), instant conversion into traditional dollars (27%), interest-earning capability on account balances (27%), and integration directly within primary bank accounts (26%). Direct cross-border utilities represent another key driver, with respondents pointing to easier international transfers (24%) and fee-free cross-border payments (22%). Broader consumer utility and safety nets round out the priorities, including merchant acceptance (22%), FDIC-equivalent deposit protection (21%), reduced retail purchase fees (19%), and dollar-pegged price stability (19%), demonstrating that convenience, liquidity, and cost savings are paramount to driving digital wage adoption.

P2P dominance threatens bank liquidity & how banks can respond

For bank payment executives, navigating this shift requires closing a disconnect. As seen in the previous Exclusive Data reports, end users are overall rail-agnostic; whether a transaction settles over legacy rails, real-time push-to-card networks, or decentralized infrastructure is irrelevant to them. What matters exclusively are tangible operational outcomes: immediate delivery when desired, price affordability and transparency, and frictionless execution within their primary banking app or payment app.

Checkout and payment abandonment is primarily driven by cost transparency, privacy concerns, and trust deficits rather than underlying technical rail limitations. Banks can directly solve every single one of these checkout frictions. By leveraging their inherent strengths, such as institutional trust, robust fraud mitigation, standardized dispute resolution, and established identity verification, banks can eliminate the friction points where nonbank and unfamiliar payment alternatives may falter, making bank-backed authentication and embedded payment rails a powerful tool to prevent customer drop-off. 

Infrastructure modernization is meaningless, however, if users are unaware it exists. To protect balance sheet liquidity, institutions must translate back-end modernization into clear, customer-centric value propositions directly within their mobile apps. When banks actively communicate that instant international transfers, transparent pricing, and immediate funds access are available from the safety of an insured primary account, they eliminate the incentive for capital to leave. The solution to deposit flight is not to out-market fintechs, but to prove that institutional security and real-time convenience no longer require a trade-off.