Panetta: Cross-border payments need interoperability
Banca d'Italia Governor Fabio Panetta urged for enhanced cross-border payment interoperability in a keynote speech in London. He highlighted the growing risk of fragmentation in the global financial system and charted a course towards faster, cheaper, and more inclusive systems.
G20 roadmap: Progress, but targets missed
Cross-border payments remain the 'most glaringly unfinished business' of financial modernization, according to Banca d'Italia Governor Fabio Panetta.
He noted that while domestic payments have transformed, international transactions often face slow rails, fragmented rules, and high costs.
The G20 launched a comprehensive roadmap in 2020 to address these issues, with the Committee on Payments and Market Infrastructures (CPMI) playing a leading role.
Significant progress has been made in strengthening messaging standards, improving payment system design, and enhancing interlinking arrangements, including the development of harmonized ISO 20022 message data requirements.
Approximately 80 percent of payment systems have either migrated or plan to migrate to ISO 20022 for domestic payments.
However, despite these infrastructure-level developments, none of the four G20 targets – speed, cost, transparency, and access – have been achieved for remittances.
The global average cost remains close to 6.4 percent, more than double the 3 percent target set for end-2030, due to both structural and domestic obstacles.
Structural hurdles burden global remittances
Cross-border payments underperform due to complexity across jurisdictions, fragmented infrastructures, and a concentrated correspondent banking model.
Foreign-exchange conversion costs are also a major obstacle, reflecting limited liquidity and competition.
These inefficiencies impose significant economic costs, especially on remittances, which reached $650 billion in 2024.
Prohibitive fees act as a 'shadow tax' on labor income.
Lowering these costs to the G20 target of 3 percent would generate annual savings of $7-22 billion for low-income households, highlighting the urgent need for more efficient and inclusive payment solutions.
Interoperability as geopolitical imperative
Panetta underscored that payment infrastructures are not neutral channels but instruments of economic statecraft, as demonstrated by coordinated financial sanctions following Russia's invasion of Ukraine.
This context elevates cross-border payment enhancement from mere efficiency to a geopolitical necessity, countering the risk of fragmentation from emerging parallel systems.
His call for collective action to maintain an open, interoperable global system is therefore crucial for global stability and to prevent higher costs and new divisions.