On 31 May 2021, the Financial Stability Board (FSB) published a consultative document on Targets for Addressing the Four Challenges of Cross-Border Payments (Consultation).
The Consultation sets out quantitative proposed targets for the payments sector which are designed to ensure cross-border payments are faster, cheaper, more transparent and more inclusive.
The targets are set across three market segments: wholesale payments, retail payments (which is defined to mean business-to-business (B2B), person-to-business (P2B), business-to-person (B2P), person-to-person (P2P) payments (other than remittances)) and remittances.
The Consultation poses a series of questions to respondents on these targets. Respondents are invited to respond to the Consultation and these questions by Friday 16 July 2021 to [email protected].
G20 Roadmap to Enhancing Cross-border Payments
The G20 has made enhancing cross-border payments a priority. Enhanced cross-border payments would have widespread benefits for citizens and economies worldwide, supporting economic growth, international trade, global development and financial inclusion.
In October 2020, the FSB had published a Roadmap for enhancing cross-border payments which was endorsed by the G20 at the October 2020 Summit.
The Roadmap described four challenges to be addressed:
- High costs: the challenge of cost comprises various elements including transaction fees, account fees, compliance costs, applied FX conversion rates and fees, fees along the payment chain, and liquidity cost for prefunding;
- Low speed: the challenge of speed involves the processing time of a payment from end to end, including factors such as the time required for dispute resolutions, reconciliations and searches, possible slow processes for funding and defunding, daily cut-off times and closing times, as well as Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) checks;
- Limited access: the challenge includes limitations for users in accessing services and for PSPs in accessing payment systems and other arrangements;
- Limited transparency: limited transparency about costs, speed, processing chain, and payments status present challenges for end-users and (other than single-platform proprietary services) for providers alike.
The FSB established the Cross-border Payments Coordination Group Task Force on Targets to set targets in line with the following principles: they are directly related to the challenges, provide a clear indication of progress, are appropriately ambitious, can be readily communicated and are meaningful to the wide range of stakeholders. These are the targets set out in the Consultation.
Consultation Targets
The proposed targets are found in Table 1 of the Consultation. They are grouped into the challenges and payments sectors identified above.
Except for the remittance cost target, a common target date is set across all individual targets of end-2027. The end-2027 target date provides a six-year period during which actions under the Roadmap will be taken and stakeholders will be operationalising the changes to infrastructures and operations as follow-up.
No cost target for the wholesale payment sector is set in the Consultation. The Consultation does, however, set target for the retail sector that the global average cost of payment is to be no more than 1%, with no corridors higher than 3%. The Consultation also reaffirms the United Nations Sustainable Development Goal that the average cost of sending USD200 remittance is to be no more than 3% by 2030 with no corridors with costs higher than 5%.
For the retail payments sector, the Consultation proposes that the large majority (e.g. 75%) of payments and remittances must provide availability of funds for the recipient of a payment within one hour from the time the payment is initiated and, for the remainder, by end of business day.
In terms of access, the Consultation proposes that all end users in the retail sector have access to at least one option (in terms of infrastructures and providers) for sending receiving cross-border electronic payments by end-2027
Lastly on transparency across all sectors, payment service providers (PSPs) must provide at a minimum a defined list of information concerning cross-border payments to payers and payees (including e.g. total transaction cost (showing FX rate and currency conversion charges), time to deliver funds, funds tracking, and terms of service) by end-2027. In some jurisdictions, legislative initiatives (such as the second Payment Services Directive (EU) 2015/2366) already mandate PSPs to provide this information.
Next Steps
The FSB will publish a final report on targets in October 2021 which will develop an implementation approach for monitoring the targets that will set out (i) how targets will be measured and data sources and data gaps to be filled, (ii) how progress toward meeting the targets will be monitored and (iii) the frequency of data collection and publication
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