The payments landscape continues to evolve and this blog shares some of the topics that caught my attention during the last month. If you think I’ve missed anything important, do please send an email to technical@treasurers.com.
G20 work on enhancing cross-border payments
Faster, cheaper, more transparent and more inclusive cross-border payment services would deliver widespread benefits for citizens and economies worldwide, supporting economic growth, international trade, global development and financial inclusion according to the Bank for International Settlements in its second stage update to the G20.
The previous report found 7 areas of friction as shown in the diagram below.
The latest update includes the diagram below.
Each of the 19 building blocks identifies a specific area which would help to mitigate one or more of the 7 cross-border payment frictions. The 19 building blocks are arranged into five focus areas. Focus areas A to D will enhance the existing payments ecosystem, while focus area E looks at more conceptual issues and covers emerging payment infrastructures and arrangements. Work on some of the building blocks is already under way in a number of jurisdictions, while with others it will take more time to assess implementation.
The third stage report was issued in October 2020 by the Financial Stability Board. This outlined the roadmap to achieving the 19 building blocks and that for all actions in 2021, actions and dates are committed deliverables.
Central Bank Digital Currencies (CBDCs)
It is becoming increasingly difficult to keep up with all of the announcements from a raft of central banks and think tanks but here are some that caught my attention:
The possible adverse impact of a CBDC on bank funding and financial intermediation, including the potential for destabilising runs into central bank money, has been a concern of central banks. Any decision to launch a CBDC would depend on an informed judgment that these risks can be managed, likely through some combination of safeguards incorporated in the design of a CBDC and financial system policies more generally.
Interesting reports
The European Commission reported on its consultation on a new Retail Finance Strategy. The report looked at four policy areas:
UK payments landscape
pay.uk provided an update on Request to Pay (RtP). The Framework went live on 29 May 2020 and the organisation has already on-boarded a Repository Service Provider and a Technology Provider. They are in the early stages of bringing a further three organisations on board. More details of RtP can be found here. RtP will have a significant impact on those organisations (such as utility companies) who have become accustomed to their customers paying on a certain date each month.
As of its migration to ISO20022 for payment messaging, the Bank of England is looking at the use of Purpose Codes and Categories. There are over 700 in use at the moment and the Bank is consulting on efforts to standardise these codes globally. The codes are seen as useful in reducing fraud, improving risk management, providing richer data and improving operational efficiencies and resilience. More information on this can be found here and if you’d like to contribute to the debate, please drop an email to technical@treasurers.org.
Naresh Aggarwal