Cross-border payments suffer from a number of frictions – they can be slow, expensive, unreliable and unavailable in some countries. These shortcomings are longstanding and have been thrown into sharp relief by improvements in domestic payments and by developers of proposals for new payment arrangements, like Libra.
To address these issues, in response to a remit from the G20, the Committee on Payments and Market Infrastructures (CPMI) has published a report, ‘Enhancing cross-border payments: building blocks of a global roadmap’, which aims to make lasting improvements in cross-border payments.
The report sets out 19 building blocks for a global roadmap to improve cross-border payments. It forms part of a three-stage process initiated by the G20. While improvements to technology are one piece of the puzzle, international cooperation and collaboration will be crucial to reduce cross-border frictions.
"The shortcomings of cross-border payments have been apparent for many years and have been thrown into sharp relief by domestic payment systems," Jon Cunliffe, Chair of the CPMI and Deputy Governor of Bank of England, said. "Cross-border payments are necessarily more complex than domestic payments, but we need to bring them into line with the standards, efficiency and reliability that users now have a right to expect."
The G20 has made enhancing cross-border payments a priority during the 2020 Saudi Arabian Presidency and asked the Financial Stability Board (FSB) to coordinate the development of a roadmap to tackle the system's multidimensional problems.
The FSB's first-stage report, which assessed existing cross-border payment arrangements and challenges, was issued in April. This publication marks the CPMI's completion of the second stage. It highlights five focus areas: a commitment to a joint public and private sector vision; regulatory, supervisory and oversight coordination; improvement of existing payment infrastructures; enhancing data quality; and exploring the potential of new payment infrastructures.
"Faster, cheaper, more transparent and more inclusive cross-border payment services would have widespread benefits for citizens and businesses worldwide, supporting economic growth, international trade, global development and financial inclusion," Cunliffe, who also co-chairs the FSB Cross-border Payments Coordination Group, said.
On this basis, the FSB will coordinate the development of a roadmap to enhance cross-border payments, which will be delivered to the G20 finance ministers and central bank governors in October 2020. This third stage will also involve the CPMI and other relevant international organisations and standard-setting bodies.
"If we are to succeed in improving cross-border payments, we require a clear political commitment and strong support from central bank governors and finance ministers, as well as private sector action," Cunliffe said. "Central banks play a key role in fostering the safety and efficiency of payments on a domestic and a cross-border level. If anything, their role is more important nowadays in view of accelerating digital innovation and the challenges posed by the pandemic."
Re-disseminated by The Asian Banker