There is room to improve the infrastructure for payments made by individuals and businesses that cross borders, according to a new report by the Committee on Payments and Market Infrastructures (CPMI), the global standard setter for payment, clearing and settlement services.
Retail payments sent from one jurisdiction to another are typically seen as slower, costlier and more opaque than payments within the same jurisdiction. Cross-border payments do involve more risks, complexities and rules than domestic payments, but the difference can often feel disproportionate.
Although competition and innovations such as mobile or e-banking have made these payments more convenient, the bulk of clearing and settlement for cross-border payments still goes through traditional correspondent banks, which struggle to handle the higher-volume, lower-value retail payments.
However, alternative clearing and settlement arrangements are emerging, which could improve the efficiency of the cross-border retail payment market. These new arrangements include links between national payment infrastructures and companies that require both payers and receivers to hold accounts.
"Safe and efficient cross-border payments are vital for growth and financial inclusion. The emergence and use of cryptocurrencies across borders signals to central bankers that our current payment systems are too expensive and slow. Action is needed to put better arrangements in place," CPMI Chairman Benoît Cœuré said.
The Cross-border retail payments report by a CPMI working group sets out a holistic view of cross-border retail payments to analyse the market and identify issues and challenges. It draws on a survey of almost 100 established and innovative providers of cross-border retail payment services around the world.
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