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G20 targets for cross-border payments: ready for revolution or evolution?

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In an interconnected global economy, the efficiency and seamlessness of cross-border payments have become paramount. The Group of Twenty (G20), a premier forum for international economic cooperation between countries, has set ambitious targets to improve cross-border payments. But the question remains as to whether these targets will usher in a new world of cross-border payments or simply add to the noise of a rapidly expanding payments landscape. At Sibos 2023, this question was the subject of debate during a key industry session.

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What are the G20 targets?

The G20’s commitment to transforming cross-border payments revolves around four main pillars: speed, cost, access, and transparency – this was touched upon by all panelists, in particular by Thomas Lammer, from the Bank for International Settlements BIS, who outlined the ambitions behind each pillar.

Real-time payments: The emphasis on real-time cross-border payments requires a comprehensive system overhaul. Widespread adoption and regulatory alignment are critical to realising the full benefits of real-time payments.

Cost reduction: Linking digital currencies and innovative payment networks can significantly reduce costs. However, the challenge lies in ensuring interoperability between various payment systems, especially when dealing with different currencies and regulatory frameworks.

Financial inclusion: Digital platforms and mobile technologies can play a pivotal role in bridging the gap and enabling underserved communities to participate in the global economy. However, addressing cybersecurity, data privacy, and regulatory compliance issues is essential to ensure secure and inclusive cross-border transactions.

Transparency: Payment service providers need to provide a minimum list of information concerning cross-border payments to payers and payees (e.g. showing all relevant charges, the expected time to deliver funds, tracking of payments) 

Consolidation need?

Traditional correspondent banking models result in complex and slow processes, frustrating businesses, and individuals. These challenges have driven the urgent need for change.

“Navigating this complexity forms a lot of the work that the G20 roadmap has been trying to unpick,” Victoria Cleland, Executive Director Payments at the Bank of England mentioned on the panel. “The starting point was to understand what the frictions are and what are the things that make cross border payments so difficult?”

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There are currently numerous projects underway that aim to better support cross-border payments via multi-currency support. Solutions such as central bank digital currencies (CBDCs), stablecoins, and open banking have the potential to reshape the cross-border payments landscape. Concurrently, these schemes aim to address the same goals as those outlined by the G20; transparency, efficiency and effectiveness.

According to panelist Takis Georgeakopoulos, Global Head of Payments at J.P. Morgan, consolidation of payment processing options and payment types is important, as he stated that – “Over time, our hope is that all of these rules and the collaboration across the G20 and other countries will help us get into a more rational world of fewer, more interoperable and more resilient payment systems, with lower costs and increased efficiency.”

Retail, remittance and wholesale cross-border payments have different dynamics and different entry points at the bank, but the payment rails they use can be the same. For businesses and institutions seeking efficiency through consolidation, payment technology providers such as Worldline can aid them through their portfolio of services. By outsourcing payment infrastructure and partnering with industry leaders, banks and financial institutions can streamline their payment flows and increase their offerings to their customers.

The path forward

The G20’s targets lay a strong foundation. However, a comprehensive transformation of cross-border payments requires a holistic approach. There is a need for broader collaboration between the public and private sectors, especially between governments, central banks, financial institutions and payment providers. Indeed, the idea of a needed ‘revolution’ may be missing the mark, as Victoria Cleland suggested: “We don’t need a revolution, we need to work in harmony and work hard to achieve the targets”. This need for collaboration was discussed by all panelists, especially in regard to fragmentation concerns. There is a need for evolution – not revolution.

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Regulatory harmonisation can positively change the currently divergent regulatory frameworks that hinder cross-border payments. To stimulate interoperability, the use of common standards and a unified approach is required. Alongside this, further education will improve the developments around how cross-border payments can impact business, as well as what solutions are available to businesses and banks to successfully support and integrate them. This extends beyond the G20. When asked whether these targets should extend beyond the G20, with broader successes in mind, Thomas Lammer stated that: “the targets themselves are formulated towards global targets. Hence, we have to go outside beyond the G20. We also have already kind of started doing so right from the beginning of the programme. a lot of the solutions that we see form a kind of footprint for others to follow.”

The G20’s targets represent a significant step towards improving cross-border payments. However, the journey towards a seamless, cost-effective, transparent and inclusive global payment ecosystem requires concerted efforts, innovative technologies, regulatory alignment, and collaboration across sectors. When asked whether the G20 roadmap can assist with restrictive regulatory reporting, Victoria Cleland stated that: “some of the things we can look at are within our control others we need to engage different authorities… We are not the ones that can change rules and law but we can help people to understand where and why these barriers form.”

The path forward seems clear, and both the panelists and the attending audience indicated a strong belief that the targets would be met. Worldline remains committed to contributing to this transformative process and believes that by working together, we can better reshape the future of cross-border payments.

By: Edward van Dooren (STRATEGIC ADVISOR WORLDLINE FINANCIAL SERVICES)
Originally published at: Worldline



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