Taking on Cross-Border Faster Payments to Meet Newfound Consumer Expectations
Reed Luhtanen, Executive Director, FPC
Today’s consumers want fast, easy, digital transactions. It is now what they are accustomed to with the seamless and easy nature of services such as Airbnb, and what they demand, given the safety concerns brought on by the pandemic. And while we are making significant progress towards creating a faster, digital payments experience for domestic transactions – with real-time payment growth expected to increase from 734 million in 2019 to 4.2 billion by 2024 – cross-border faster payments is an area that still needs some work.
Today, cross-border transactions represent a trillion-dollar market. Data suggests that total global cross-border payment flow will top $156 trillion by 2022. While it represents a significant portion of payment value, cross-border transactions can be complex, involving a number of different players, can take some time to reach the intended recipient, and lack interoperability. But with volume and value of these transactions only expected to increase, cross-border faster payments are easily the next payments pain point ripe for solving.
At the FPC, we are tackling this issue head on. We have established a Cross Border Payments Work Group, and the work of these dedicated FPC Members has already resulted in the release of our latest white paper, Cross-Border Faster Payments. The paper addresses use case and experience requirements for cross-border faster payments, along the dimensions of speed, cost, ubiquity, transparency, and risk. It also identifies interoperability approaches, along with associated settlement schemes that are necessary to create a world-class cross-border payment system. While the paper does not prescribe the specific interoperability approach to achieve faster cross-border payments, it does outline three models that could facilitate cross-border payments of the future, and the pros and cons associated with each of them.
All signs point to the industry being ripe for this information. In fact, the Financial Stability Board also recently issued a consultative document, Targets for Addressing the Four Challenges of Cross-Border Payments, in which it seeks feedback to help set quantitative global targets for addressing the challenges of cost, speed, transparency, and access faced by cross-border payments. Feedback will be accepted through July 16, 2021, and can be sent to email@example.com. Ultimately, final feedback will be delivered for endorsement at the G20 Summit in October 2021 and published.
Certainly, achieving a seamless cross-border faster payments vision won’t be an easy task. It will take continued education, dialogue, feedback, and consensus to get us there. As our cross border paper highlights, “Influential payments industry groups, combined with national and regional bodies that have been driving local faster payments, must come together to agree on methods of interoperability, settlement, and messaging to provide a cross-border faster payment.”
The FPC is driving this conversation and addressing other tough faster payments topics. If you’d like to join these efforts, please consider becoming a Member of the FPC and joining our Cross Border Payments Work Group or any of our other Work Groups addressing faster payment opportunities and challenges. Visit fasterpaymentscouncil.org/Why-Join-the-FPC to learn more.
We hope you’ll join us. Because, without a doubt, we’ll continue to leverage ideas, input, and work effort from our Members and the greater industry to advance faster payments, and we want your voice reflected in our decisions.