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The BIS through the CPMI is actively working on a global project aiming at enhancing cross-border payments. Can you tell us more about this project, its genesis and its main objectives? How is it different from past initiatives?
The payments landscape has changed dramatically in recent years. Domestic payment systems have been evolving dramatically to meet customers’ 21st century demands, and many of us are already benefiting from instant, contactless and digital payments. At the regional level, cross-border and multi-currency payment schemes and payment systems have been successfully launched. The Single Euro Payments Area is a prominent example of this development. However, payments across borders are still largely perceived to be slow, expensive, opaque and, in some countries, difficult to access.
To address these shortcomings, the G20 Finance Ministers and Central Bank Governors, at the end of 2019, tasked the Financial Stability Board (FSB) working with the CPMI to deliver a roadmap to enhance cross-border payments. The roadmap was endorsed by the G20 at the end of 2020. The roadmap covers both wholesale and retail payments (including remittances) and differentiates 19 building blocks in five focus areas: (i) public and private sector commitment, (ii) regulatory, supervisory and oversight frameworks, (iii) existing payment infrastructures and arrangements, (iv) data and market practices, and (v) new developments, such as central bank digital currencies (CBDC) and global stablecoins.
What is different from previous initiatives? While previous efforts focused on certain segments of cross-border payments, such as international remittances, the G20 roadmap acknowledges that enhancing cross-border payments for all citizens is a complex and multidimensional problem and therefore requires a comprehensive, cross-sectoral and ambitious approach.
The roadmap sets out concrete actions in each of the 19 building blocks. The CPMI is leading or co-leading more than half of those building blocks. Other key public sector bodies include the FSB, the Financial Action Task Force, the International Monetary Fund and the World Bank. Together our members span most countries around the globe, covering all levels of economic development.
The next steps vary by the individual building blocks depending on the diagnostics of the impediment and the solution. Some actions can be accomplished quite quickly, others will take several years. The aim is to ensure that we make progress as quickly as feasible, while building the foundational elements to support the more complex and forward looking solutions. Actions already completed include a joint statement by the Basel Committee on Banking Supervision and the CPMI on the Supervisory Guidance on managing FX settlement risk and the Global FX Code, issued at the end of 2020. In March this year, the BIS Innovation Hub and SWIFT successfully completed a hackathon that highlighted the benefits of the messaging standard ISO 20022 and application programming interfaces. 260 participants across 60 teams spent seven-days applying ISO 20022 and
to improve cross-border payments. Early July, we will publish a stocktake report on CBDC for cross-border payments. We will also launch a consultation report on the application of the Principles for Financial Market Infrastructures to stablecoin arrangements. And later this year, we will publish a report on operating hours of and access to payment systems.
Frictions in cross-border payments have persisted for decades. As I noted, this is a complex issue and there are no quick fixes to many of these challenges. The two most important success factors, in my mind, are cooperation and ambition.
Absent a coordinated and sustained initiative supported by both the public and the private sector, we will not see the improvements we seek nor the development of a broad range of cross border payment services to support the changes in the way we live and transact. This effort requires the buy-in of all relevant stakeholders.
It is critical that the roadmap has sufficient ambition to make real improvements in payments around the globe, while remaining flexible in the manner in which individual jurisdictions take forward these improvements. We will measure success against a set of targets, which are expected to be endorsed by the G20 in October 2021. The FSB will be seeking input on these targets by means of a public consultation in June and July.
We are fully committed to implementing the cross-border payments agenda over the next couple of years. I noted the importance of cooperation above. Pushing the frontiers of payments forward requires efforts from all of us, private and public sector alike. The private sector plays a key role in advancing innovation and new solutions for the benefit of end-users. Private actors, be they traditional providers or new market entrants, are increasingly leveraging new technologies and introducing new products. Many of those new products have the potential to improve cross-border payments.
The solutions must maintain overall safety and efficiency of payments and that is where the public sector comes in. The traditional plumbing for cross-border payments and the existing financial infrastructures play key roles. Safe and efficient means of payments are built upon robust legal and regulatory frameworks and generally rely on traditional public sector financial infrastructures.
We are holding regular meetings with private sector participants and seek input via conferences, calls for papers, surveys and public consultations. The interest in this topic is enormous. In March we organised a virtual conference with more than 2,000 people from 139 countries, from industry, academics and authorities. We will continue this engagement throughout the programme implementation and we are counting on stakeholders, such as the, to help create a truly global payments area.