The Meaningful Work to Achieve Faster Payments
Reed Luhtanen, Executive Director, FPC
The holiday season is a time to appreciate the more meaningful things in our lives. At the FPC, we embrace that mindset in all that we do, ensuring we are always providing value to the industry and taking impactful steps to get us closer to our faster payments goal.
That’s why we continually evaluate and review activities, projects, and programs to make sure they are meeting needs and objectives. To that point, last month, we announced the launch of our new Secure Instant & Immediate Payment APIs Work Group, and shared details on how we refined the mission and scope of the QR Codes Work Group and the Directory Models Work Group to better support industry developments, and awareness and understanding gaps. And this month, we continue in that vein, announcing enhancements to the Cross Border Payments Work Group.
Cross-border payments account for a significant portion of today’s transactions. It is estimated that by 2027, the value of these transactions will grow to $250 trillion. But as we all too well know, cross-border payments can be riddled with complexity. As outlined in our Cross-Border Faster Payments White Paper, cross-border payments “face more counterparty and currency exchange risk and more rules and forms of governance than their domestic counterparts.” Because they rely on correspondent banking relationships, “[they} suffer from multiple ‘hops’ before money is delivered to the ultimate receiver. This often makes the payments more costly, slower, and less transparent.”
It is for these reasons, and more, that entities like the FPC and others are taking steps to address some of the flaws in cross-border payments. Recently, The Clearing House announced it is teaming up with EBA Clearing and SWIFT to make cross-border payments more seamless and faster. The three organizations completed a proof of concept known as Immediate Cross-Border Payments (IXB) that synchronized settlement in multiple instant payment systems and converted real-time messages between both systems. According to the announcement issued around the initiative, “By taking advantage of existing infrastructure, technology and standards, IXB can help to satisfy, in the near term, customer expectations across the globe for a simple and more transparent way to send cross-border payments.”
Additionally, the Federal Reserve Board recently announced the Federal Reserve Banks will adopt the ISO® 20022 message format for the Fedwire® Funds Service, allowing for more efficiency in cross-border payments and richer data capabilities. To help expedite implementation of the standard, the Board invited public comment on a revised plan for migrating to the new message format on a single day, rather than in three separate phases as previously proposed.
Given these recent developments, highlighting the growing importance of achieving cross-border faster payments, it is fitting that the Cross Border Payments Work Group refined efforts to align with the state of cross-border payments today. To that end, the Work Group will renew its commitment to providing comprehensive industry awareness, highlighting new and emerging domestic and global cross-border initiatives and their potential impact on existing practices; use cases and user experiences; and areas of focus based on needs of both consumers and businesses. To encourage continued understanding and learning, the Group will complete its work in phases with each phase building off the review and findings of the previous phase(s) through incremental industry updates.
Whether it’s refining current Work Groups like Cross Border Payments, releasing new research, or launching new programs, assessing our programs and initiatives ensures the work we do is relevant and the surest way to meet the needs of the industry. And, with your help, we’ll continue to embark on the meaningful work that will support a faster payments future for all.
So, if you’re not part of the FPC, we invite you to join us. Your involvement, contributions, and input will help power the significant work that will continue to move us forward. Join us today by visiting FasterPaymentscouncil.org/Why-Join-the-FPC.