The world is watching: hitting G20 targets for cross-border payments

During the Sibos 2022 session: 'The world is watching: hitting G20 targets for cross-border payments', guest speakers Victoria Cleland, Executive Director Payments with the Bank of England, Chris Jameson, Co-Head of Product Management with the Bank of America and Ritu Jutla, Transaction Banking Sales with Goldman Sachs, discussed how defined targets can be achieved, what tasks still need to be done and what it requires from everyone involved.

G20 top priority

For the G20 - the intergovernmental forum comprising 19 countries and the European Union - enhancing cross-border payments has been a major financial issue discussed with top priority. The reason is simple: with analysis, it was found that there was certainly room for improvement. Cheaper, more transparent, more inclusive, and faster international transactions – including remittances – would have huge benefits for economies and citizens on a global level. Although everyone is affected by this aspect of our global economy, small companies and individuals face specific challenges with retail cross-border payments. In developing economies and emerging markets, financial inclusion continues to present itself as adversity to many. Small payments may incur high fees as a percentage of the amount sent, which not all users can absorb as easily.

Roadmap to enhance cross-border payments

In 2020, the G20 asked the Financial Stability Board (FSB) to coordinate a three-stage process to develop a roadmap to enhance cross-border payments alongside relevant stakeholders. This process was briefly outlined by session speaker Victoria Cleland, who also discussed the ‘holistic nature’ of the approach to outlining each challenge and associated targets from a broader perspective. The main challenges of cross-border payments lie mostly in high costs, low speed, limited access and an overall lack of transparency across wholesale, retail and remittance market segment. In October 2020, the roadmap was published as a comprehensive plan for addressing the identified challenges, including practical steps and indicative timeframes.

G20 cross-border targets

The process to enhance cross-border payments continued into 2021. In October of that year, the FSB released its progress report on the first year of the G20 roadmap, along with specific quantitative global targets for addressing the challenges of cross-border payments. In the below table, the four challenges are outlined, along with the targets associated with each.

So, where are we today?

The FSB will publish in November 2022 an update on its planned framework for monitoring progress toward the G20 targets for cross-border payments. The targets have been set to motivate progress along the roadmap. In terms of concrete progress, Victoria suggested that results can be difficult to quantify, stating that:

"The targets themselves come into effect in 2027, but clearly we need to be working now in order to meet them, so right now, I can’t provide any quantitative feel for how far along the track we are.”

However, in terms of the overall roadmap, Victoria noted that progress toward future goals has been evident, with positivity on the horizon.

“The Bank of International Settlement published a new progress report today, with several actions completed. These actions alone are not enough, although we see real tangible success. Next steps will be moving to ISO20022, increased access to systems and industry cooperation. ISO20022 is crucial to progress, as is interoperability.”

In an audience poll, transparency was voted as the audience’s most critical point to address, further highlighting this aspect. Additionally, Chris Jameson suggested several additional areas where attention is needed.

"Equally important, I think, is the stability, safety and security, and resiliency of the financial systems and payments infrastructure we all leverage today. Compliance and sanctions screening are essential to achieving that. Still, they're also very, very fractious and cause a lot of pain points for commercial banks and the underlying users of the payment."

Throughout the Sibos discussion, the importance of strong coordination, commitment and accountability was reinforced by all three speakers. In their parting words, all three indicated that these will be critical to success.

“Building collaboration should be the key focus for us all, which needs global economic interoperability,"suggested Chris. "So, we have to have interoperability between the various systems, the tools, the schemes, the banks and commercial banks. Without that, we will not get there."

This view was supplemented by Ritu Jutla, who suggested that: "We've talked about other means to address the challenges, but until we break that (collaboration) barrier, I think it will be, you know, a significant challenge to move as far forward as we need to without that global view. And that harmonisation effort."

This final note on harmonisation was echoed once again by a second audience poll. In it, the audience responded that the biggest barrier to improving cross-border payments was harmonisation of regulatory and supervisory frameworks. This must come through taking shared responsibility and the momentum that comes from international cooperation and interoperability.

From our side, Worldline is highly committed to contribute to the G20 targets by migrating Clearing & Settlement Mechanisms (CSMs) from batch to instant, by providing SWIFT gpi services to banks and corporates, and actively contributing to existing and future cross-border industry initiatives like International Payments Frameworks.