Future of Finance



It’s time to fix cross-border payments



Cross-border payments are notoriously expensive. They are also slower, less reliable and less transparent than domestic payments, in which transfers are now (or soon will be) both instant and instantaneously visible. One reason for these inadequacies is that an oligopoly is at work. There are around 25,000 banks in the world, but almost every cross-border payment ends up being handled by just 15 of them, all of which have relationships with thousands of correspondent banks. Unsurprisingly, given that cross-border payments are also cross-currency, the 15 banks are more or less synonymous with the banks that make up the foreign exchange (FX) oligopoly. CLS, the FX settlement utility set up by the major central banks, is able to cover 87 per cent of transaction volumes across 19 major currencies with a user-base of just 70 member-banks. A mere 14 of the CLS member-banks offer CLS services to the corporates and asset managers that ultimately drive FX activity, as opposed to servicing other banks. Many banks have withdrawn from correspondent banking altogether – the number is down 20 per cent since 2010 – chiefly because of the compliance risks of customer due diligence: banks do not know their customers’ customers and fear being fined for breaches of anti-money laundering (AML), countering the financing of terrorism (CFT) and sanctions regulations. In other words, more than 99 per cent of banks are just processing foreign currency payments for their own domestic or regional customers and relying on the services of the members of the oligopoly to actually send money abroad. This is why it takes an average of 2.6 banks to move an estimated US$1.5 trillion a day across borders. Yet cross-border payments are vital for economic prosperity, international trade, global financial stability, continuing growth in international e-commerce and international travel and especially in poverty reduction. Remittances worth US$707 billion passed through the system in 2019, US$529 billion to people in low to middle income countries, at an average cost of 6.82 per cent in transaction charges. This is why the G20 has made improving cross-border payments a priority and asked the Financial Stability Board (FSB) to come up with solutions; why the United Nations has set a target of reducing remittance charges to 3 per cent by 2030; why the Committee on Payments and Market Infrastructures (CPMI) has published a list of 19 “building blocks” to enhance cross-border payments; and the Bank for International Settlements (BIS) has pondered whether central bank digital currencies (CBDCs) could provide the key that unlocks for companies and consumers the value currently being eaten by banks.

The topics to be discussed will include:
1. What is the case for concentration (as opposed to competition) in cross-border payments?
2. Why are banks withdrawing from correspondent banking?
3. How big a problem are KYC, AML, CFT and sanctions screening risks?
4. Are digital identities a solution to KYC, AML, CFT and sanctions screening risks?
5. Is data privacy a problem?
6. How big a problem is legacy technology, infrastructure and processes (e.g. batch processing, limited operating hours) and, if so, how can the problem be overcome?
7. Are the problems worse in some currency pairs than others and, if so, why?
8. Are currency controls an aspect of the problem?
9. Can transaction management platforms that offer transaction monitoring and repair and cost transparency (such as SWIFT gpi) help?
10. Why can’t domestic payment market infrastructures (PMIs, either or both of ACHs and RTGSs) be linked?
11. Is adoption of data standards (e. g. ISO 20022) a pipedream?
12. Are APIs an alternative to structured data exchanges?
13. Must FX conversions be left to commercial banks?
14. Are cross-border and cross-currency FinTechs doing anything except transfer value from banks to themselves?
15. Do new private sector initiatives (such as Stablecoins, central bank omnibus accounts and bi-lateral, pre-funded settlement in commercial bank money) offer durable solutions?
16. Are funding costs (liquidity savings) an incentive for banks to change their behaviour?
17. Is this at root a data problem that can be solved with better data?
18. Do CBDCs offer the ultimate long-term solution?


Arjun Jayaram, Founder and CEO at Baton Systems

Arjun Jayaram is Founder and CEO of Baton Systems, bringing over 22 years of technology experience. Previously, he served as Vice President of Technology at Dwolla, a consumer and retail-focused payments solution, during which he was a member of the Fed Secure Payments task force, and he also managed Anti-Spam at Twitter. Arjun was also Co-founder and Chief Technology Officer of Compass Labs, a social media advertising company, which was later sold to Yahoo. Arjun holds an MBA from California State University and a BTech from Calicut University.

Daniel Eidan, Advisor and Solution Architect at BIS

Daniel is an Advisor 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.

Daniel Heller, Digital Currency and DLT Economist at Fnality

Daniel is the Head of Regulatory Affairs at Fnality International.  Previously, he held various senior positions at the Swiss National Bank (SNB), the Bank for International Settlements (BIS)  and the International Monetary Fund (IMF).

Stephen Grainger, Executive Vice President Cross-Border Services, Mastercard

Stephen is responsible for leading the companies’ account-based cross-border payments offerings, enabling international payments from any funding source, to any destination, for any need. Stephen’s role is key to driving Mastercard’s multi-rail strategy by delivering innovative payment applications that allow people and organisations to send and receive money how, where and when they choose, over card or account-to-account infrastructure. Prior to joining Mastercard, Stephen held the position of Managing Director for SWIFT, where he was responsible for its North America business. His career spans more than 18 years, with previous roles at Goldman Sachs, Bank of America, Merrill Lynch and Citi. Stephen has a degree in Economics from the University of Anglia. Stephen lives with wife and two daughters in London

Vikesh Patel, Head of UK and Ireland at SWIFT

Vikesh Patel is Head of Americas, UK, Ireland (Ad interim) and Head of UK, and Ireland. In this role, Vikesh is responsible for SWIFT’s Business Development and Client Relationships across these countries, as well as strategic direction and growth in the region. In addition, Vikeshis a senior Diversity & Inclusion Sponsor within SWIFT, focusing on Race and Ethnicity.

Vikesh joined SWIFT in 2017, charged with strengthening the cooperative’s key relationships and delivering commercial performance across its portfolio of products and services.

Moderated by 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.

If you would like more information please contact Wendy Gallagher on wendy.gallagher@futureoffinance.biz.

We are keen to involve the audience and if you would like to send questions ahead of time please do email them to Wendy on the email above.