The journey towards truly immediate cross-border payments

On the first day of EBAday 2023, immediate cross-border payments were discussed throughout two sessions, exploring progress and current status, with several questions answered such as: How far has the payments industry come in designing and realising initiatives for cross-border payments? What will the payment experience be like for end customers? How do regional initiatives fit into the global context? And what is the current status of immediate cross-border payments?

A long journey ahead with much more to come

Rapid digitalisation and a globalised approach to payments have driven the development of immediate cross-border payments. However, several significant challenges impact speed, cost, and efficiency. Panellists were aligned in recognising the strides made in development, but outlined that challenges remain. For instance, cross-border transactions often involve multiple banks, financial institutions, and payment infrastructures. Throughout the process, each 'link in the chain' usually takes multiple fees, which can quickly add up. As a result, businesses may struggle to make immediate cross-border payments truly cost-efficiently.

This complexity increases processing times, significantly impacting time-sensitive payments and potential business. However, as the panellists indicated, an element of friction will always remain. The question revolves around removing unnecessary friction, whilst retaining resilience. Today's society increasingly demands transparency within services. The payments landscape is the same. Being able to track the status of payments, total fees, expected speed, and receipt of payment are substantial considerations for modern consumers and businesses. Due to their often complex nature, cross-border payments, in their current form, often lack in this regard.

Rising to the challenge on a global scale

A major consideration for the future effectiveness of immediate cross-border payments globally is ensuring local payment methods and processes can seamlessly integrate into global initiatives. This element of collaboration and seamlessness was highlighted across the panel as an effective way of countering the challenges and criticism of cross-border approach. As payment types vary across worldwide, the challenge of interoperability remains a significant barrier to overcome in the journey towards truly global payment infrastructure.

The panel also suggested that a key consideration has to be the needs of customers – something they suggested still often lacks. While instant payments and cross-border abilities are flourishing across all regions – do they make sense for all customers?

Effectively addressing these challenges requires collaboration between banks, financial institutions, regulators, and technology providers. Several initiatives, including the ISO 20022 standard and SWIFT's Global Payments Innovation (GPI), aim to improve immediate cross-border payments' efficiency, speed, and transparency. However, these represent just one aspect of the innovation and cooperation needed to create a seamless and cost-effective cross-border payment landscape.

The ISO 20022 standard provides a standardised format for exchange between different financial institutions, becoming the de facto standard for international payments. It addresses the lack of standardisation, leading to inefficiency, errors, and delays. ISO 20022 provides a common language for financial messaging, creating a more seamless payment process. 

It also allows for additional information with payments, such as invoice and document details, enabling better payment tracking and more efficient settling and crediting. Overall, it represents a robust initiative designed to address the multiple evolving challenges created by cross-border commerce. However, it requires collaboration and acceptance between financial institutions to deliver on its potential.

Focusing on the end-user experience

Ultimately, in order to create better experiences, products and services for their customers, financial institutions and payment providers should embrace innovation around immediate cross-border payments. During the panel session, the need for differentiating between corporate and private clients regarding the solutions they require was highlighted as a priority for banks. For individuals and businesses, the ability to seamlessly make payments globally without unnecessary complexity, and with clear oversight of costs, safety and speed is increasingly becoming a must-have rather than a nice-to-have.

For businesses especially, the ability to make and receive immediate cross-border payments regardless of currency can open the door to a new era of opportunity, driven partly by the rise of digitisation and global uptake of digital payment methods and currency types. The competitive nature of the modern business environment necessitates successful businesses to offer their customers something new and exciting to stand out.

In conclusion, the panelists indicated that due to various drivers, such as tech, regulations or market developments, different approaches have evolved across regions, resulting in diverse payment networks. This is likely to continue, making true interoperability on a global scale a major challenge; perhaps the most significant that lies ahead.

At Worldline, we are excited to see what possibilities lay ahead and how the payment landscape further evolves in the coming months and years.