Cross-border instant payments – soon the new normal?

The current modest number of users of SEPA instant payments is likely to skyrocket soon, as the corresponding offers will become mandatory for financial institutions in the foreseeable future. However, real-time credit transfers in this context only work in the euro area; funds transfers across its borders are still slow, non-transparent and expensive. But the topic of cross-border instant payments is also gaining momentum. There are now numerous projects both on the government and private side with the objective of transferring means of payment cross-border and in real time. Our whitepaper "Global Instant Payments – An Ever-Growing Network" provides an overview of the current status.

The most important results of the whitepaper "Global Instant Payments – An Ever-Growing Network"

  • All large economies have now introduced an instant payments system.
  • Asian countries in particular see instant payments as a growth factor and are promoting their use.
  • With NEXUS, SWIFT gpi instant and IXB, approaches for international instant payments solutions already exist.
  • Alternative approaches use internal clearing mechanisms (Wise) or modern technologies such as blockchain.
  • Europe's financial institutions should move from an observer to a shaping role.
Cover page of the white paper “Global Instant Payments - An Ever-Growing Network”

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Real-time cross-border credit transfers – (no longer) a utopia?

While instant payments, i.e. payments processing in real time, are hardly used in Europe, other economic areas are already much further ahead. The ASEAN countries see such payment methods as a location factor and promote them accordingly. They are also thinking beyond their national borders, and the first networks of different currency areas already exist. In view of the current normality of cross-border payments with their lack of transparency, slowness and high costs, a trend of where the future lies can clearly be seen.

Given the fact that almost all major economic areas worldwide have now brought their own instant payments systems to market maturity, the idea of connecting these networks is an obvious one. However, there are legal and technical hurdles in the way. Different data formats and fundamental differences in regulation make the setup of corresponding payments processes a challenge. Nevertheless, there are at least initial approaches, specifically NEXUS from the Bank for International Settlements, SWIFT gpi instant and IXB. The latter project initially provides for a corridor for real-time credit transfers between the euro and US dollar areas.

In addition, there is a whole range of alternative approaches that either turn cross-border payments back into domestic payments via an internal clearing mechanism and accelerate them in this way or utilise state-of-the-art technologies. These include blockchain or distributed ledger technology, such as Bitcoin or stablecoins. These systems are without borders and are at least in principle also suitable for cross-border instant payments.

Europe's financial institutions would do well not only to observe the developments but also to play a shaping role in order to be a first mover in the growing market for real-time credit transfers in cross-border payments. Our whitepaper "Global Instant Payments – An Ever-Growing Network" provides an overview of current developments and takes a look ahead.