CPMI conference on "Pushing the frontiers of payments: towards faster, cheaper, more transparent and more inclusive cross-border payments"

Online conference hosted by the CPMI on 18 and 19 March 2021 - On-demand streaming of our conference sessions is available on the event webpage biscpmi.navus.io.

Conference Proceedings are available here.

Over the past few decades, domestic payment systems have undergone a radical transformation. New payment methods and interfaces have taken shape, and many more innovations are under way. Yet cross-border payments are still in many cases slow, expensive, opaque, and for many users not easily accessible.

In October 2020, the G20 endorsed an ambitious roadmap to comprehensively tackle these challenges and make lasting improvements to cross-border payments. The CPMI is leading more than one half of this ambitious programme.

This CPMI conference brought together market participants, authorities and academics to share research and policy analyses and sought to identify future developments and dynamics that will facilitate cross-border payment enhancements. The online conference took place on 18 and 19 March 2021. The full agenda and the conference sessions are available for streaming on demand on the event webpage biscpmi.navus.io.

Conference Summary

In his opening remarks, Sir Jon Cunliffe (Chair of the CPMI and Deputy Governor, Bank of England) reasoned that technological changes will need to be complemented by better alignment of regulatory frameworks between jurisdictions. Competition and innovation are essential to facilitate the development of multiple services that match the diverse needs of those who send and receive payments across borders. He noted that pushing the frontiers of payments requires a public-private payments partnership: central banks value and encourage innovation in the private sector, while public sector action is needed for sustainable and strategic change in cross-border payments – on the domestic and international level alike. He added that fixing the frictions and failings in cross-border payments, which have persisted for decades, will not occur overnight. However, this conference with its discussions, industry responses and academic papers is an essential first step towards improving cross-border payments and is an integral part of implementing the ambitious G20 roadmap.

The first two panels addressed how to make existing payment infrastructures and arrangements fit for cross-border purposes by improving the back-end and front-end of cross-border payments: the issue is not simply about technology; transparency, liquidity, messaging, speed and legal issues must also be addressed. Panelists also saw the cooperation between the public and private sectors as required to improve cross-border payments. The second panel focused on the consumer experience and considerations around new entrants. They noted leveraging identification systems can facilitate pre-validation and help reduce costs.

The second two panels focused on streamlining data exchange to improve cross-border payments. In terms of legal arrangements, the consensus was that efforts should start with regional solutions and then build on these to form a global solution. A decentralised approach to know-your-customer (KYC) and digital identity was considered more likely to be successful than a global centralised approach. In terms of payment messaging, it was noted that adopting ISO 20022 will be key to making progress. Panellists agreed that in addition to messaging standards there is a need to agree on the required message data. Panellists also highlighted the importance of data protection authorities and citizens' trust in the proper safekeeping of their personal data. As Hyun Song Shin (Economic Adviser and Head of Research of the BIS) said in his wrap-up: "technology is important, but trust is the foundation for the system and data governance is mostly a policy question rather than a technological one."

In his closing remarks, Jerome Powell (Chair of the Federal Reserve) noted that existing systems are safe and dependable but suffer from frictions. The Covid-19 pandemic has brought into even sharper focus the need to address the limitations of our current arrangements for cross-border payments. Improvements will come from both the public and private sector and require a collaborative effort across jurisdictions and all types of stakeholders.

The second day of the conference focused on exploring the potential of new payment infrastructures and arrangements to enhance cross-border payments. In his opening remarks, Agustín Carstens (General Manager of the BIS) spoke about how interoperating central bank digital currencies (CBDCs) could enhance cross-border payments, touching on what the BIS is doing to support this.

The first panel focused on multilateral payment platforms. Reinforcing some of the key messages from the first day, the panellists concluded that lack of proper technology is not the issue for multilateral payment platforms, rather the challenge arises from disparities in anti-money laundering and combating the financing of terrorism (AML/CFT) regulations, legal basis, participation requirements, foreign exchange (FX) conversion and liquidity. There is a need to strike a balance between access, coverage and resilience. The public sector can play a key part in ensuring the security and resilience of the whole system and catalysing a drive towards harmonisation of regulatory requirements and payment messaging. However, the panel also agreed that the public sector must partner with private actors to enhance cross-border payments.

The remaining three panels focused on digitalisation of cross-border payments, with a particular focus on CBDCs. The second panel looked at legal and regulatory challenges from digitalisation of cross-border payments. One panellist argued that banks need to be incentivised to put their clients first, and that the implementation of best execution principles in securities markets could serve as a model. The last two panels discussed international developments and policy issues regarding CBDCs, respectively. The lessons learnt from central banks' explorations of CBDCs were that it is an evolution rather than a revolution. It is critical to understand the appropriate design for each country and the environment may change rapidly over time. CBDCs and stablecoin arrangements could be complementary solutions existing in parallel. Panellists identified the potential improvements to cross-border payments through shorter transaction chains, improved processes, and increased competition. They also touched on the financial stability risks, such as the implications of a CBDC for bank runs and monetary policy, including the risk of currency substitution.

In his keynote speech, Piero Cipollone (Deputy Governor of Banca d'Italia), framed the G20 cross-border payments roadmap in the context of the themes of the Italian G20 Presidency, namely people, planet and prosperity. For people, he noted that fund transfers across jurisdiction can still be difficult and inefficiencies are borne by individuals and small and medium-sized enterprises (SMEs). For the planet, in re-designing the global payments ecosystem, he noted that we must be conscious of the link with the environment, both in terms of how extreme natural events could disrupt the payment chain and the environmental footprint of transactions. Finally, easier and cheaper access to international fund transfers improves prosperity for consumers, SMEs and large corporations.

The closing remarks were given by Alejandro Díaz de León (Governor of Banco de México) and Sir Jon Cunliffe. Alejandro Díaz de León stressed that international coordination around fulfilling the actions in the roadmap can make a real difference to cross-border payments. The goals are ambitious but achievable, and the approach is flexible and adaptable. Sir Jon Cunliffe noted that the conference has exceeded expectations in terms of raising awareness and gathering insights on how to address the issues with cross-border payments. The insights have mainly been in the form of difficult questions, such as how to align regulatory and legal frameworks, and how to deal with data privacy and protection issues. He argued that the answers are not known at this point, but it is important that we are aware of the questions, that we bring the issues together in the one forum to understand the interactions and that we adapt our efforts as necessary.