The practicalities of cross-border payments in a faster payments world

The U.S. Faster Payments Council (FPC), has published its latest research report, titled The Practicalities of Cross-Border Payments in a Faster Payments World.

Cross-border in a faster payments world

This new report builds on the FPC’s previous white paper, Cross-Border Faster Payments, released in June 2021, which focused on use cases and user expectations for cross-border faster payments.

Developed by the FPC Cross-Border Payments Work Group, the report delves into the history of cross-border payments, examining the evolution from ancient trade routes like the Silk Road to modern-day global financial systems.

It explores the challenges faced by financial institutions in correspondent banking relationships, shedding light on regulatory compliance, security concerns, foreign exchange rate risks, and the impact of fintech players entering the field.

The report also highlights the challenges faced by fintech companies, providing insights into regulatory compliance, security, foreign exchange rate risks, lack of transparency, high costs, interoperability, data privacy, competition with financial institutions, and liquidity management.

“Addressing the practicalities of cross-border payments in a faster payments world requires collaboration among financial institutions, regulatory bodies, and technology providers,” explains Barry Tooker, FPC Cross-Border Payments Work Group Chair.

“Innovations in financial technology, such as blockchain, real-time payment networks, and standardized messaging formats like ISO 20022, offer opportunities to streamline and improve cross-border payments. Overcoming these challenges is crucial for fostering global economic growth and enabling seamless international transactions.”

The report underscores the increasing pace of change, mentioning key developments such as SWIFT’s gpi, the global rollout of the ISO 20022 standard, the exploration of Distributed Ledger Technologies, the use of APIs, and the rise of Central Bank Digital Currencies.

“In a world of faster payments, understanding the practicalities of cross-border transactions is vital to navigating its complexities and challenges,” says Jonathan Holland, Vice President, Account Management at Mastercard.

“The full ecosystem – from financial institutions to fintechs to payments networks – will continue to collaborate and innovate, leveraging regulation, interoperability and cutting edge technology to further optimize this critical payment process.”

The report emphasizes the transformative impact of new transaction banking initiatives, urging stakeholders to adapt to changing paradigms.

It highlights the need for constant review and adaptation to emerging technologies, industry initiatives, mandates, and regulatory directives to ensure a smooth and efficient payments workflow.