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Most of 2021’s targets have been met, but the success of the Financial Stability Board’s (FSB) roadmap for cross-border payments will depend heavily on the commitment of public authorities and the private sector working together, the standard-setting body has cautioned in its latest progress report.
The collective effort and actions of the public and private sectors are going to be required to implement the agreed changes in the coming years and to achieve the targets that have been set out in the roadmap, the new progress report on cross-border payments says.
“Central banks must improve their own core payment systems and thus enable the private sector that often relies on their systems to follow suit,” the FSB has said, continuing that, at the same time, private sector development of new payment systems and arrangements, and enhancements to existing services, can contribute to the improvements required.
This has already been the case in recent months. Cross-border payment linkages have been tested by both public sector bodies, such as the central bank of Italy and the Arab Monetary Fund, as well as via private sector initiatives, such as that of SWIFT, EBA Clearing and The Clearing House.
“In order to achieve progress in a timely manner to meet the targets, the public and private sectors will need to begin their planning and budgeting for the needed enhancements very soon,” the report says.
Work has already been undertaken in the last two years, with a primary focus on laying the foundational elements for future plans on the roadmap.
This has included the publication of specific quantitative targets at the global level that address the challenges of cost, speed, transparency and access faced by cross-border payments.
For example, for retail payments, the FSB’s roadmap has established an end-2027 target of 75 percent to provide availability of funds for the recipient within one hour from the time the payment is initiated. The remainder of the market must be within one business day of payment initiation.
Speed targets have also been established for remittances and wholesale payments by the same deadline.
Meanwhile, the FSB has set a target of an average transaction cost of 1 percent of the value for cross-border retail payments, as well as no corridor with costs higher than 3 percent by end-2027.
Currently, costs can reach up to 10 percent, depending on the card issuer and/or merchant fee, as well as the FX margin.
“Customers are expecting the same from their cross-border payments as they get with domestic payments,” said Fabien Depasse, customer success chief at SWIFT, while speaking on the Sibos "Removing friction in cross-border payments" panel.
This was echoed by his co-panellists, including BNY Mellon’s Isabel Schmidt.
“Spending is going cross border,” said the clearing and assets head, continuing that this growth has been observed in both business to consumer payments and e-commerce. “These areas are growing a lot per year, and are continuing to grow tremendously,” she said.
We need to achieve a seamless payments experience, Schmidt said.
The expectation is that we remove the cross-border element from our payments, agreed Marc Recker, global head of payments at Deutsche Bank, noting that initiatives such as ISO 20022, an increasingly common global payment standard, are helping to make that a reality.
According to the FSB, the targets will be made fully operational in 2022 through the development of an implementation approach to help monitor progress.
The next stage of work includes the development of specific proposals for material improvements of underlying systems and arrangements, as well as the development of new systems, the FSB said.
“Making these practical improvements and taking advantage of new developments will require global coordination, sustained political support and investment in systems, processes and technologies,” the report says.
