- A group of international organizations outlined the risks, benefits and challenges of expanding and improving cross-border payments by way of a new international platform, or through an extension of current domestic and international payments systems, in a new report this month.
- The Jan. 18 report, “Exploring multilateral platforms for cross-border payments” was produced by the Bank for International Settlements, the International Monetary Fund, the World Bank Group, the Committee on Payments and Market Structures and the Innovation Hub. The report envisions a system that reduces the cost of cross-border payments and increases speed, safety, transparency and inclusivity.
- It also noted the uncertainty and importance of attracting participants; the need to maintain competition; and the complexity of developing a governance approach for such a system. “While regional multilateral platforms are usually spearheaded or even operated by regional institutions, it might be more challenging for global platforms to obtain the same level of support from international organisations,” the report noted.
The report lands at a time when payments are evolving at a rapid pace, with financial technology innovations, new market entrants and government initiatives are transforming legacy systems. For instance, real-time payments are accelerating payments worldwide.
At the same time, cultural changes worldwide are driving payment systems toward more inclusivity for all people. The G20 international forum has been seeking for years to lower the cost of cross-border payments in the interest of reducing the cost burden of such remittances on migrants worldwide.
While there are regional cross-border systems today, the report noted the limitations of existing systems and the challenges they face for extending their reach.
The international organizations behind the report offered their analysis in the context of the trends and treated it as only their latest step in a long-term endeavor. They pointed to the need for government support of such a cross-border payment system expansion, especially with respect to initial seed funding and regulatory standards.
“It would be critical for the public sector to closely monitor its establishment and evolution, to ensure that participation requirements and pricing policies support fair and open access, and governance arrangements uphold policy objectives of fair competition and interoperability,” the report said of any new system.
The report also made clear the private sector should be involved as well. Payments startups in the U.S. and elsewhere have focused on developing products and services that allow for more efficient cross-border payments. New York-based Sable and Seattle-based Remitly are two companies pursing new products and services in that realm.
Authors of the report also noted another route to improving cross-border payments might be the creation of central bank digital currencies. Some countries have already developed CBDCs and others, including the U.S., are exploring the possibility.