Payment corridor
Payment corridor refers to a specific sending-to-receiving route for cross-border money, defined by country pair and currency pair. An example is US dollars sent from the United States and paid out in pesos in Mexico.
How it works
Corridors are the basic unit of cross-border payment analysis. The World Bank's Remittance Prices Worldwide database tracks 367 country corridors. These span 48 sending countries and 105 receiving countries. Each corridor has its own pricing, partners, rails and regulatory checks.
Global targets are also set at corridor level. The Financial Stability Board's 2021 targets aim for no retail corridor above 3% cost by end-2027. For remittances, the aim is no corridor above 5% by 2030. Speed targets ask that 75% of payments reach recipients within one hour by end-2027.
For treasury, each corridor is a separate liquidity pool. Volumes, currencies, cut-off times and partner terms differ by route. Swift notes that the last mile in the receiving market can take most of the processing time. Aggregating corridors into one global figure hides shortfalls on individual routes.
Example
Illustrative example: A firm runs three corridors. Daily outflows are £400,000 for UK to Nigeria, £150,000 for UK to Kenya and £50,000 for UK to Ghana. Total outflow is £600,000 a day. Nigeria is two thirds of that total, so it needs most of the prefunding.
Frequently asked questions
Is a corridor the same as a currency pair?
Not exactly. A currency pair describes the FX conversion. A corridor also fixes the sending and receiving countries, and so the rules, rails and partners involved. Two corridors can share a currency pair yet have very different costs.
How should we compare corridors when deciding where to expand?
Compare expected volume, achievable pricing, available payout partners and licensing needs. Then model the working capital each corridor would lock up in prefunding. A busy corridor with slow settlement can need more capital than its margin supports.
Related terms
Sources
- About Remittance Prices Worldwide · World Bank
- Targets for Addressing the Four Challenges of Cross-Border Payments: Final Report · Financial Stability Board
- G20 goals for enhancing cross-border payments · Swift
Know where all your money is.
Polynopsis gives cross-border payment teams one live position across every bank, payout partner, exchange and wallet, including money in flight, and warns before a corridor runs dry.