A Future of Finance webinar with payments professionals, banks, payments infrastructure, regulators and technology companies
Wednesday June 22 at 2pm UK time
Cross-border payments are, in the now familiar mantra of the G20, slow, expensive, opaque and inaccessible. This matters because, despite a slowdown in the rate of growth of world trade, cross-border payments are becoming more important, not less. Remittances and e-commerce are more than making up for any shortfalls in exchanges of physical goods. Consultants BCG predict the value of cross-border payments will increase from US$150 trillion in 2017 to US$250 trillion by 2027 – a two thirds increase in just a decade. As it happens, 2027 is the date set by the Financial Stability Board (FSB) for the achievement of four quantitative targets designed not only to cut the costs, increase the speed and enhance the visibility of the costs of cross-border payments but widen access to competitive cross-border payments services as well. The four targets are just one of 19 “building blocks” laid down by The Committee on Payments and Market Infrastructures (CPMI) in July 2020 as the foundations of a better, faster and cheaper cross-border payments system for the world economy. Unfortunately, the targets are also the only product of the 19 building blocks which can readily be grasped amid the miasma of surveys, analyses, consultations, task groups, workshops, liaisons, hackathons and vague but extendable deadlines which surround alleged progress in other areas. Yet fast and measurable progress is desperately needed. Cross-border payments represent a continuous and hefty toll on international trade and capital flows. Transactions can take several days, cost ten times as much as a domestic payment and devour 10 per cent of the face value of a payment. Although the work of the FSB reads as if the problem is extremely complicated – and it is, not least because of the number and range of the parties involved – the origins of this tax on commerce are now well-understood. The CPMI labels them as seven “frictions”: legacy technology; long transaction chains; funding costs; weak competition; fragmented and truncated data formats; complex compliance checks; and limited operating hours. The G20 made fixing these frictions a priority. Yet more than two years have passed since the FSB published its assessment of current cross-border payment arrangements in April 2020; almost two years have passed since the CPMI published its list of 19 building blocks for a better system in July 2020; and 20 months have passed since the FSB and the CPMI published a roadmap with timelines on how to deliver the building blocks. Nor did the first progress report from the FSB of October 2021 convey much sense of urgency or dynamism. Indeed, it succeeded mainly in diverting attention from the tedious bureaucratic labours itemised in the report to two interesting but futuristic alternatives to the status quo in cross-border payments: central bank digital currencies (CBDCs) and Stablecoins. Yet less glamorous measures are not only essential to the achievement of the four targets – as the FSB points out, the 19 building blocks are interdependent – but more likely to yield quick results. In many jurisdictions, competition to provide cross-border payments services cannot work because cost opacity means payers cannot distinguish between the costs of different ways of paying; most domestic banks can do no better than take prices from a coterie of 15 major global banks; and non-bank service providers are denied access to the central bank real-time gross settlement (RTGS) system. Likewise, replacing laborious customer due diligence tests with digital identities is an obvious way to cut costs dramatically and speed up the processing of payments, but the FSB now seems more interested in creating centralised data utilities than in re-designing a failed procedure. Allowing assets in one jurisdiction to secure liquidity in another would not only ease cross-border payments blockages but free up resources trapped in excess liquidity buffers, but private sector initiative to solve this problem are unmentioned. Even achieving the four quantitative targets will ultimately depend much less on exhortation by the FSB than on investment by banks and central banks in replacing their legacy systems, but the progress report offers no clues as to why either would invest. Indeed, discussion in the FSB papers on displacing correspondent banks by infrastructural links of various kinds is strangely muted, though it provides an obvious stick with which to encourage banks to invest now. So a gap seems to have emerged between aspiration and reality. Which is why this Future of Finance webinar will ask whether the momentum imparted by the G20 to the reform of cross-border payments is dissipating and, if it is, what can be done to restore it.
The topics to be discussed will include:
- What will it take to deliver the four quantitative targets set by the FSB to cut the cost, increase the speed, enhance the transparency and improve the accessibility of cross-border payments?
- What is the best solution to the cost and delays associated with KYC, AML, CFT and sanctions screening checks?
- Why is it important that non-banks be admitted to payments market infrastructures?
- Are links between payments market infrastructures a valid alternative to correspondent banking networks?
- What opportunities for improvement do CBDCs offer?
- What do CBDC use-case experiments in payments and securities markets tell us about the value of using CBDCs to settle transactions across national borders?
- Can Stablecoins make a useful contribution to enhanced cross-border payments services already?
- Do blockchain networks have a useful part to play?
- What are correspondent banks doing (or what services are they buying) to improve operational performance in processing cross-border payments?
- Could banks be displaced by FinTechs, social media and telecoms companies capable of providing a better user experience?
- What part are SWIFT and CLS playing in the enhancement of cross-border payments today and what part could they play in the future?
- The FSB identifies ISO 20022 as a major part of the solution, but what can be done to increase adoption?
- Are Legal Entity Identifiers (LEIs) a lost cause?
- Is the FSB process too bureaucratic?
- What would happen if central banks abandoned collaboration with the private sector and imposed changes on the banks?
Angus Fletcher, Commercial and Regulatory Senior Director at Fnality
Angus Fletcher is currently a senior Commercial and regulatory advisor at Fnality International, which is establishing a global network of distributed payments systems. Prior to Fnality, Angus has over 20 years in post trade and regulatory roles spanning strategy, industry advocacy, change and day to day operations working for Standard Chartered, Deutsche Bank, SWIFT, Morgan Stanley and Citi.
Daniel Eidan, Advisor and Solution Architect at Bank for International Settlements, Innovation Hub
Daniel is an Adviser and Solution Architect at the Bank for International Settlements (BIS) in the Innovation Hub where he builds technology solutions for the central banking community with a special focus on blockchain and CBDC. Before the BIS he was at R3, was a lead software engineer and was an educator and manager at a leading technical training school. He started his career as a Combat Commander in the Israeli army and received an honours degree in Computer Science from the University of Toronto.
Ankur Sharma, Product Manager Payments at BCB Group
Ankur is a Product Manager at BCB Group where he is currently leading payments and banking products and overseeing the growth of BCB’s proprietary payment settlement network, BLINC. Prior to BCB Group, he was the lead Product owner looking after commercial banking for Metro Bank. During his career spanning more than 15 years, he has held several key roles within the payments, digital transformation and core banking space with the likes of Metro bank, HSBC, Lloyds banking group, NatWest, IBM, and has launched mobile apps and implemented payment schemes for leading high street banks.
Gottfried Leibbrandt, a Payments Expert and Author
Gottfried Leibbrandt is a payments expert, the former CEO of SWIFT, an alumnus of McKinsey, and author (with Natasha de Teran) of The Pay-Off: How Changing the Way We Pay Changes Everything.
Dominic Hobson, Co-Founder at Future of Finance
Dominic Hobson has worked for himself for 30 years. He was one of the founders of Asset International, a transatlantic financial publishing, events and survey business, which was sold in 2009.
Since then, Dominic has contributed to the work of two data businesses covering financial markets, run a peer group network for hedge fund managers, and co-founded the Future of Finance, which hosts events on innovation in finance.
As one half of Hobson Cardew, Dominic also provides consultancy services to a number of financial services businesses and market infrastructures.