Cross-border payments: the next frontier 

Cross-border payments are growing fast, with the trends such as increased borderless e-commerce, rising cross-border B2C payments and global trade improvements. With increased demand comes the need to make payments more secure, transparent and instant, as well as inexpensive. With the direction of cross-border transactions in the next decade now clear, it’s time to turn our heads to how goals such as the G20 3% target cost by 2027 can be achieved. Simon Eacott, Head of Payments at NatWest, gives us his outlook on the cross-border space right now and the actions the industry needs to take in order to make cross-border payments safe, speedy and simple, all at a low cost. 

Cross-Border payments – What’s Next? 

The days when a cross-border payment could take days to arrive and required multiple banks with opaque fees are long gone. Today, most cross-border payments arrive in less than 30 minutes, and the enhancements we have seen to country corridors and domestic infrastructures continue to improve transparency and speed. But as the industry strives to reach the G20 target cost for a payment – 3% by 2027 – the question is, how will we get there? 

Improvements in cross-border payments lag those seen in domestic payments 

Regional innovation is making progress  

Given that so much trade, whilst being cross-border, is regional, the surprise is less that there is renewed interest in this space but that it’s taken a while to arrive, for example: 

• Nordics: The P27 new platform is being built/designed (and ultimately will be priced) with this in mind. 
• ASIA Pac: There is instant QR based cross-border payments between Vietnam and Thailand and instant payment between Thailand and Singapore – payment is made in seconds with a smartphone by linking the instant payment rails between the 2 nations. 
• Europe: The EU is moving to mandate SEPA instant payments. 

It’s encouraging to see the industry spending less time explaining why cross-border payments, messaging or managing AML rules are complex; regulators and payments professionals know the issues. Programmes to educate consumers on themes such as ‘Stop, Challenge and Protect’ – both for domestic and international payments – need to continue and the industry needs to accelerate use of AI in monitoring and identifying suspicious activity. However, today’s activity is increasingly focused on efforts to make sending money overseas safe, simpler smart, fast … and at a lower cost. This is leading to more collaboration and “out of the box thinking” – which is why in Q4-2022 NatWest, along with several global banks, participated in both a CBDC sandbox and Swift hackathon exploring new ways of moving money. There remains much to do in this space but separating well-publicised negative news stories from the benefits new technologies may bring, offers a range of opportunities that address regulator objectives – greater innovation and competition with improved customer outcomes.  

In time, all payments, will be instant or near real-time