Two Holy Grails For Cross-border Payments: Access and Interoperability

A new international banking report admits to continuing problems in making payments from one country to another, but points to improvements. The report is based on a detailed analysis of the market, a survey of about 100 service providers and workshops with stakeholders from the supply side and the demand side (end users). Efforts to widen access to online payment accounts and prepare the way for the interoperability of payment systems/networks, closed-loop systems and crypto-currencies would seem the most fertile ground for achieving quicker, cheaper and more transparent cross-border retail payments.

Findings include:

• Cross-border retail payments are generally slower, less transparent and more expensive than payments within the same country. 

• Even large corporate users making high-value and/or frequent payments experience a lack of transparency and uncertainty over settlement timing and exchange rates. 

• Smaller businesses and individuals who typically make smaller, less frequent payments are more concerned about access to services and high costs.

• Users' priorities depend on their particular circumstances and requirements, so choice of different options and features is critical.

• Most users have choice as to who provides their payment services but individuals without access to transaction accounts lack access to many initiatives that have improved convenience and speed for other users. So, progress towards providing universal access to (online) transaction accounts is likely to provide more options to those who currently rely on cash.

• Back-end service providers themselves have problems with messaging, clearing and settlement of cross-border retail payments. There is little choice among back-end clearing and settlement methods, with the only feasible option often being correspondent banking rather than, say, ensuring the linking or interoperability of payment systems/networks, closed-loop systems and peer-to-peer distributed ledger technologies (e.g. crypto-currencies). So, progress towards harmonised messaging standards and simultaneous trading and settlement of different currencies will help solve problems here and could result in quicker, cheaper and more transparent cross-border retail payments.