Cross-border payments roadmap nears end, future questions emerge

The G20 launched its Roadmap for cross-border payments in 2020, aiming for them to be faster, cheaper, more transparent, and inclusive.

Despite this ambitious goal, achieving it has proven challenging, as noted by the Financial Stability Board's Deputy Secretary General.

Global quantitative measures, endorsed by the G20 in 2021 and mostly set for end-2027, indicate significant work remains.

The speech highlighted four key reasons for slow progress.

Market structure and incentives are complex, with cross-border payments often marginal to providers' business models.

Exogenous dependencies, such as reliance on foreign exchange markets, fall outside the Roadmap's remit.

Technology adoption dynamics show a preference for second- or third-mover advantage.

Finally, political and regulatory authority is widely distributed, lacking a global mandate and often limited by domestic coordination issues between central banks and finance ministries.

The speech explored potential solutions, including stablecoins and the ISO 20022 messaging standard.

Stablecoins currently represent a very small fraction of total cross-border payments, estimated at less than 0.2 percent of USD 200 trillion in 2024.

Their immediate value may lie in hybrid models integrated with bank money rather than stand-alone rails.

Efforts to reduce technical frictions, such as poor data quality and limited standardization, have seen some success.

ISO 20022, introduced in 2004, aims for richer payment data.

Twenty years on, 77 percent of fast payment systems and 53 percent of real-time gross settlement systems report implementation.

However, full benefits require consistent usage and embedding the standard into end-to-end operations, demanding significant investment from banks to leverage its enhanced data elements.