Summary report of the roundtable hosted by BIS Innovation Hub and the Monetary Authority of Singapore
The ‘Enabling & scaling instant cross-border payments’ roundtable took stock of efforts to enhance cross-border payments, identified potential challenges and opportunities, and facilitated the sharing of common pitfalls and best practices.
The roundtable focused on the development of a viable and sustainable commercial & adoption model for a global multilateral payments platform.
Cross-border payments had been a key global focus since the G20 endorsed the Roadmap for Enhancing Cross-border Payments in 2020. In ASEAN, the vision of a regional interconnected payments network had been reinforced by the Regional Payment Connectivity initiative signed in 2022, driven by increasing low-value cross-border transactions volume amidst the digitalisation wave.
While bilateral links between faster payment systems were implemented for cross-border person-to-person remittances and QR code payments, the establishment of each linkage consumed large amounts of time and resources and faced many challenges in scalability, sustainability and efficiency.
For that reason, the concept of a multilateral instant payments network like Nexus1 appeals, where participants would only require a single point of connection to Nexus to unlock global cross-border payments globally, while leveraging on existing domestic instant payments systems.
The ambition is for Nexus to become a global instant payments network that is safe, cheap, fast and widely accessible, driving financial inclusion and allowing people and businesses worldwide to send and receive money easily. It is also envisaged that Nexus would be complementary to other global payment rails.
1 Project Nexus has been an initiative spearheaded by the BIS Innovation Hub and partnering central banks and instant payments operators to develop a multilateral network connecting multiple domestic instant payment systems (IPS). More details about the project can be found at https://www.bis.org/about/bisih/topics/fmis/nexus.htm
'Enabling & scaling instant cross-border payments' roundtable took place at Elevandi Insights during the Singapore FinTech Festival, November 2023
1. Introduction
Several key themes emerged from the insights shared by central bank leaders from ASEAN 5.
Firstly, the design of a multilateral payments network must fulfil the fundamental principle of serving the overall public good, including promoting financial inclusion and economic growth within every jurisdiction.
Secondly, strong public-private partnership is key to building cross-border payment linkages, given the high requirements for infrastructure, technology and systems to process payments in a secure, reliable, and efficient manner. This needs to be done collaboratively between the public and private sector actors and such partnerships must consider and balance the perspectives of various stakeholders to ensure financial sustainability, long-term standardised services and affordability of the cross-border payments solution.
Thirdly, there is an evident trade-off between time-to-market and viability. While it is the goal to develop a global product that caters to the various needs of prospective participating jurisdictions and end users as globally as possible, it is also crucial that the ASEAN 5 work towards developing a minimum viable product in the shortest possible time, so as to test out potential pathways and use cases before further scaling and expansion.
2. Key Insights from Session 1: Instant Cross-Border Payments. Where are we today, what have been the latest developments and what are the remaining pain points.
There has been continuous innovation in payments in recent years, particularly in ASEAN, with the evolution of real-time transfers and QR payments domestically. More recently, this technology has entered the cross-border payments space, resulting in the creation of bilateral instant payment linkages such as PromptPay-PayNow (PPPN). These bilateral developments have led efforts supporting Project Nexus, which aims to connect Instant Payment Systems (IPS) in a more scalable and multilateral manner, with the focus to ensure seamless plug-and-play for new participating jurisdictions.
Several pain points were highlighted in the development and implementation of a cross-border payments network.
Lack of uniformity in standards and regulatory frameworks are significant roadblocks in achieving a multilateral payment network. Complexities such as diverse regulatory, data and compliance postures across jurisdictions, lack of common workflows to handle disputes, lack of common technical interface and lack of standard operational rules are significant barriers to establishing uniformity and clarity across jurisdictions. There is a need for solutions that ensure interoperability and seamless connectivity between different payments networks, through harmonisation of compliance and risk management issues across different jurisdictions, as well as a coordinated approach to ensuring the security and integrity of the cross-border payments network.
Lack of customer awareness may impede the adoption rate and build-up of critical mass required to reap the benefits of network effects of a multilateral platform. The success of bilateral and multilateral payment linkages is partially dependent on the commitment of industry participants to raise awareness and drive adoption of cross-border payments amongst users.
Last-mile delivery is a key challenge in the implementation of cross-border solutions. While it is important to ensure effective integration of payments networks at the macro level, the ultimate success of a solution is determined by how conveniently users can access and rely on new forms of payments in an inclusive manner. This is especially critical for a region such as ASEAN, given the large number of small merchants and payment service providers.
3. Key Insights from Session 2: What would success look like if scaled instant cross-border payments is achieved? How to get there?
Looking towards the future, participants shared key ideas and features that would make a successful model for cross border payments.
Standardisation is achieved across various levels, through cooperation between central banks, network operators and other private participants.
This standardisation could span technical frameworks, payment schemes and technical software, promotion and alignment of ISO20022 messaging standards, harmonisation of regulatory requirements, and standardisation in APIs.
Centralised sanctions screening should be enabled by the scheme operator to improve efficiency. Enabling a centralised, real-time sanctions screening process will alleviate the pain points for smaller payment service providers, as not all are able to conduct screening services in real-time on a 24/7 basis. However, liability for ownership remains a key barrier for centralised sanctions screening.
Conducting oversight in a collaborative, democratic, and neutral manner that caters to the needs of global participants is critical to scale to a global level.
Prioritising investments in infrastructure and technology developments is necessary to protect against evolving threats and to ensure the security, reliability, resiliency and safety of the cross-border payments network and preserve public and consumer trust in digital payments.
In summary, there is a need to establish a public-private partnership to ensure commercial viability for private sector participants while also ensuring adherence for the desired public policy objectives. Joint partnership from both the public and private sector is also key in creating the desired network effects and envisaged benefits of a multilateral cross-border payment network. We hope the learnings and insights from this roundtable can help to inform existing and upcoming cross-border payment arrangements. Further solutioning to address identified pain points and challenges would also be welcomed as part of future discussions.