Crossborder Payments G20 Roadmap – the view from 2020

by | Nov 26, 2020 | Uncategorized | 0 comments

During 2020, G20 has put a focus on enhancing Crossborder payments. Two stages of the project have been completed during 2020 as planned, and on October 13, 2020 the third stage which is a multi year plan was initiated.

This plan is called the “Roadmap” and sets in place not only a stepped guide to what to solve for in Crossborder payments on a timeline, but also sets out a public and private collaboration model.

Emerging Payments Association, as the leading global payment association, has adopted a worldwide focus on crossborder payments, and on Nov 18, 2020 brought together several regional and global payment leaders to hear and comment on the Financial Stability Board presentation around crossborder payments. 

The Asia chapter of Emerging Payments Association is running a member project on Crossborder payments, run by the members for the members. A joint collaboration for “private sector” collaboration events and workstream has been initiated with IIF (Institute of International Finance), over the coming years to bring together payment leader and regulators to effect the required improvements to Crossborder payments.

The session on Nov 18 was held under Chatham House Rules, so the extent of what this article can share is discussed with this in mind.

The key themes from the workshop are outlined below. The G20 project is ambitious, and will require collaboration.

 

The ambitious project

“Those who are crazy enough to think they can change the world usually do.”….Steve Jobs

The G20 project looks at seven frictions, five focus areas, across 19 building blocks, and has now set-out to enhance the processing around these across the world.

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AML and KYC, compliance and checking is recognised as a major area of concern. Any opening hours are seen as a way of bridging some of the time gaps that occur in global processing.

Long transaction chains with many different intermediaries can also create processing gaps, as a payment traverses borders through the hands of many. Remittances in particular are in focus with the UN and the World Bank, and new targets have been drafted. Funding currency costs through the payment value chain is a consideration.

The lack of global standards that are in use can often cause delays and increased cost as transactions cross borders.

The final key area is the infrastructure that is used, and more importantly what is available to be future used.

Despite all of the challenges and the breadth of work that has been committed to, actual dates of achievement has been set from 2021.  

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As one can see from the diagram there are many moving parts to be tackled from the getgo. This will only be tackled through collaboration.

 

 

Only through collaboration

Alone we do so little, together we do so much”…Helen Keller.

The challenge of improving Crossborder payments is exasperated by the fact that the transactions span across different regions, and each region has its own set of norms. It’s a bit like airplane flight paths – they seem to work quite well but it is only because all countries collaborate under global standards and rules. 

For payments there are the public and private aspects of the collaboration effort. Public and private focus can be different. Private focus is often lead by what is profitable. Whereas public focus is mainly about what is good. When both work together there has be happy mediums achieved. And it is indeed important that both do work together as one without the other can lead to un intended consequences. To some extent to can see that in Asia Pacific. As APAC is not a unified political/economic zone we rely on the goodwill and domestic initiatives to get the job done. 

Then it becomes a trade off between resources and technology. This then comes down to resources and scarcity. The payments world will resist unilateral change where they are not consulted.

How do track accountability

“Accountability breeds response-ability.”…..Stephen Covey

So how do we know if we have achieved success? Well that will be obviously as the frictions and pillars will be solved for? But, as we see in payments each day the landscape shifts. The make of the industry changes along with the rules and broader payment flows. For example we are seeing shifts from remittances to movements toward digital currencies. 

The best what to track is to do in a dynamic and flexible way, where we can reset and take revised actions as required.

The accountability for this project will be delivered annually to the G20 and to the public. 

The Role of Standards

“The quality of a leader is reflected in the standards they set for themselves.”…. Roy Kroc

Standards for the existing flows and for the flows that don’t event exist today are key. Apart from getting standards drafted, it is the implementation of these standards that is key to their adoption.

SWIFT, along with ISO have been having success in this space.

Standards cover all aspects of Crossborder payments, including event currency definities and in particular as we move to the stablecoins.

 

Where to from here?

EPA Asia and IIF are now commencing planning around the future collaboration forum. The leadership of that forum to be announced shortly and the future event planning will follow thereafter.

A webinar panel was held post the round table, and the recording is available here.