Technology Remains the Key Delta in the Race for Cross-Border Payments Domination, Reports The Payments Association

The Payments Association, which celebrates innovation and collaboration across the payments industry, has released a new whitepaper exploring the growth potential and future of Cross-border Payments, citing technology as a key driver in making them cheaper, faster and more accessible. In doing so, it will bring huge benefits to businesses and households in emerging and developing countries. In recent decades, the world has witnessed a remarkable surge in cross-border payments, driven by the globalisation of trade, capital, and migration flows. Despite such growth, cross-border payments remain prohibitively expensive, which leaves the most vulnerable behind. While domestic payments are becoming instant and digital, cross-border payments have yet to benefit from the transformative power of digital technologies. Against this context, The Payments Association’s Cross-border Working Group, with the support of Benefactor Payall, has completed research into the current challenges and obstacles that financial institutions (FIs) face when trying to deliver cross-border payments. The research, entitled: ‘King for a Day: Charting the future of cross-border payments’ has been completed following a survey of the industry, plus a series of interviews with senior payments experts – enabling the whitepaper to chart a new path for the cross-border payments ecosystem which would unleash huge untapped potential for financial institutions, businesses and individuals who depend on, and struggle with, international fund transfers. Specifically, the report concludes that:

• A greater pivot to tech solutions from legacy debate is needed.
• The regulatory obsession with efficiency is premature.
• A roadblock of incentives means some things will never change.
• Technology needs to reposition and redefine the correspondent bank role.
• ‘High Risk’ classification needs an overhaul – via the ID Authentication Key.
• The convergence of XB and domestic will yield many easy wins.
• Liquidity optimisation – hidden gold?
• Economic reset is a double-edged sword.
• Crypto, CBDCs, Blockchain: not THE answer but a component.
• A central bank consortium would speed change.

Rasika Raina, Mastercard’s Senior VP, Strategy and Solutioning, Transfer Solutions summed up the challenge with regard to technology noting that “our competition is archaic technology” adding “the problem is that the industry is, in some cases, using 40 to 50 year old technology and arrangements like correspondent banking to address a $156 trillion cross-border payments sector.” The research concludes that, as might be expected, there is no quick or easy fix to many of the long-standing frictions in cross-border payments. However, a combination of technology, a fresh way of approaching certain legacy challenges, and a willingness of like-minded Central Banks and regimes to agree high level standards, and use tech to implement them, will be a very good starting position. Ultimately, lower costs will be a clear outcome, but in the interim, and in a new world of higher rates and inflation, it is more important to avoid strangling innovation than it is to deliver on the order of thinking established several years ago before the world changed during the COVID pandemic. Gary Palmer, CEO, Payall, said: “Every country, city and even remote villages, are touched by globalisation. The way we work, receive medical care, communicate, shop, pay and travel have all changed dramatically from technological transformations. Overall, just about every part of our lives are radically different than just a few years ago and unrecognisable from 50 years ago. Not so in cross-border payments. The question we must keep trying to answer is can money move at the speed of data globally? This whitepaper, completed through industry survey and interviews with leading experts, challenges the status quo with provocative questions, relevant research, news ideas and ultimately suggests that tech and new paradigms will transform the complex, high-risk and manual mess we call cross-border payments.” Tony Craddock, Director General of The Payments Association, commented: “Payments continues to grow at a phenomenal rate and, within this, cross-border still represents a huge opportunity. This vital piece of research is key in illustrating how technology will be the key driver for the industry to reduce the amount of friction, so people keep more of their money and receive it faster.” The Payment Association’s Cross-Border Working Group has the specific purpose to help identify and increase awareness of the technology in the market that is transforming the cross-border payments eco-system for its users and providers, as well as informing the evolving regulatory landscape. To learn more, download a copy of ‘King for a Day – Charting the Future of Cross-border Payments’, here: https://thepaymentsassociation.org/whitepaper/charting-the-future-of-cross-border-payments/ The whitepaper will also be discussed during The Payments Association cross-border payments webinar ‘It’s time to change the status quo in cross-border payments’ Thursday, 30 November. To pre-register, please visit: https://thepaymentsassociation.org/event/its-time-to-change-the-status-quo-in-cross-border-payments/ For more information about The Payment Associations’ Cross-border Working Group, visit: https://thepaymentsassociation.org/portfolio/project-cross-border/ For more information on the work and services of The Payments Association you can visit: https://thepaymentsassociation.org/