An effective global payments ecosystem must unlock socioeconomic benefits for economies across the globe – no matter the size or remoteness. Empowering efficient cross-border payments offers opportunities for widespread financial inclusion for everyone from businesses to consumers. In 2020, the G20’s Financial Stability Board (FSB) underscored the importance of this work with a roadmap of targets for achieving faster, cheaper, more transparent and inclusive cross-border payments, without sacrificing on safety or security.
Now in its third year, the Roadmap for Enhancing Cross-border Payments emphasises responsible innovation and partnership to support worldwide interoperability. It includes targets like limiting the cost of a cross-border payment for retail users at 1% of a given transaction; achieving one-hour speed for 75% of international payments; and providing full transparency on the payment’s terms, cost, speed and status by 2027. We’re seeing impressive advancements towards these goals, with Swift
reporting that 89% of transactions processed on its global financial messaging network reach recipient banks within an hour.
But with these steps forward, customer expectations continue to rise – particularly around sending money in ways that are predictable, affordable and traceable. As challenges remain from complex payments chains and fragmented environments, financial institutions must work together on responsible innovations to empower a frictionless and interconnected payments system that meets the G20 targets.
Meeting expectations, together
With new forms of value coming to the fore, from CBDCs to digital assets and beyond, individual institutions may struggle to provide seamless cross-border payments within a global network of disparate payment systems. These sources of friction can’t be addressed on their own – organisations must come together to create plans for powering cost mutualisation, creating joint oversight frameworks, improving infrastructures, enhancing data quality and setting new payment arrangements.
For example, delays remain across payments systems due to exogenous factors like currency controls or a lack of 24/7 operations. Collaborating towards improved processes, such as the current migration to ISO 20022 as an open global standard for financial information, will provide consistent and structured data to remove friction.
There are also hurdles in offering competitive fees and terms, as low value payments may require different cost logic compared to those with high value. Plus, high fixed fees per transaction may make payments uncompetitive. Organisations also still struggle to expose fees upfront, due to complex payment chains involving multiple actors. Leveraging cost mutualisation among providers can help lower base costs and pass savings to end users by means of lower fees.
And, importantly, there are calls to address payments access for financial inclusion. Customers want to pay from anywhere, to anywhere. Collaboration is crucial for sending payments worldwide from any recipient type – whether it be bank accounts, digital wallets or cards.
The power of engagement
Regular and transparent engagement between public and private sectors will be essential to enhance cross-border payments. Even if industry-led initiatives get off the ground, they require cooperation from market participants to really work. Proactive engagement from respected entities will benefit new programs. Commitments towards responsible innovation from payment systems, regulating bodies and key industry participants alike will foster this public-private collaboration.
With the promise of more innovative projects, it’s critical that we share learnings with one another to ensure successful implementation. Public consultation, pipelines of milestones and ongoing progress reviews will arm the payments industry with the knowledge to see how far we’ve come, while also pointing us towards what else is needed to bring the G20’s roadmap to life. Partnership from industry participants will safely accelerate innovation and interoperability as we create a truly global system that powers financial inclusion for an increasingly complex world.