Reed Luhtanen, Executive Director, FPC
This month, the FPC released the results of the third installment of the Faster Payments Barometer, the annual survey that gauges progress and perceptions around faster payments, use cases, trends, and challenges. Each year, the survey is telling: always providing an accurate pulse on where the industry stands with regard to faster payments in the United States. 2021’s results spoke loudly, showing us that the industry is doing more but also wants even more when it comes to ubiquitous faster payments.
For example, 84 percent of organizations view faster payments as a “must-have,” up nearly 10 percent from 2020, and 86 percent of organizations now report using or enabling faster payments. But organizations aren’t stopping there; they’re planning to grow their offerings: The Barometer revealed that 85 percent of organizations have plans to implement at least one additional faster payments system within the next two years.
According to the 2021 Barometer, the industry also has its sights set on faster payments beyond the United States, with real-time, cross-border payments serving as a chief point of focus. Given the near-universal use or enablement of domestic faster payments, it is not surprising that the industry is turning its eye toward real-time cross border payments. Cross-border payments is a massive market, with global cross-border payment flow projected to top $156 trillion this year. Representing a significant portion of payment value, cross-border payments need immediacy, and the idea of clearing and settling those transactions in seconds is attractive to all payments organizations. That, combined with the fact that we are making great strides in advancing U.S. faster payments, probably plays a major part in why the Barometer indicated almost 90 percent of organizations believe the United States should implement cross-border payments within the next five years.
Faster cross-border transactions have been and continue to be an important component of our faster payments advancement journey, which is why they are a central part of FPC work. Our Cross Border Payments Work Group has been working diligently on efforts to grow understanding and progress around faster cross-border payments. Last year, the Group released its Cross-Border Faster Payments white paper, which addressed use case and experience requirements for cross-border faster payments, along the dimensions of speed, cost, ubiquity, transparency, and risk. It also identified interoperability approaches, along with associated settlement schemes that are necessary to create a world-class cross-border payment system. The Group is currently working on its next industry resource, which will provide an overview and perspectives on the role of Central Bank Digital Currencies and cross-border faster payments.
And other industry participants and FPC Members are working towards real-time cross-border payments as well. Late last year, EBA CLEARING, SWIFT and The Clearing House (TCH), announced an initiative called Immediate Cross-Border Payments (IXB), which would enable instant payment settlement and real-time messaging between two systems. A number of U.S. financial institutions are participating in the initiative, which could provide FIs of all sizes an efficient solution for faster, cross-border payments, and serve as a significant step towards advancing real-time cross border initiatives.
These efforts and the results of the 2021 Faster Payments Barometer have shown us that as an industry we’ve made significant progress. But there is a strong desire for continual advancement to achieve faster payments in the United States – and beyond – and a resistance to settle for anything less.
At the FPC, we won’t settle either. We’ll continue to work through our Work Groups and with the greater industry to address the challenges and barriers that impede faster payments advancement here in the United States and across the borders. Together, we’ll advance and evolve faster payments to bring about the results the industry desires to see.