Moderating the second panel of the day, Niamh Curran, senior reporter at Finextra, engaged in a discussion on real-time cross-border payments with Patrik Havander, head of B2B Connect Europe at Visa; Christian Schwarz, director of payments Europe at Finastra; Dr. Hubertus von Poser, member of the management board at PPI; Colin Williams, global lead for clearing transformation at J.P. Morgan; and Jenny Winther, head of payment schemes at Svenska Handelsbanken.
Curran began by inquiring about recent advancements in the harmonization and communication of cross-border payments over the past year. The consensus among the panel was clear: while there have been some strides—including the upcoming EU instant payments regulation and migration to ISO 20022—progress has not been as swift as desired.
“We see progress and a lot of initiatives,” Schwarz noted. “Innovation is ahead of us, but is the speed enough? I don’t think so. We’ve been discussing ISO since 2002 and instant payments since 2010. We’re moving in the right direction, but we’re not there yet.”
Williams emphasized the importance of ISO 20022 for standardization and harmonization in cross-border payments. However, he pointed out that the pace of change remains problematic. Currently, only about 20% of Swift cross-border traffic utilizes ISO 20022 formatting. When Curran asked Williams about the gaps remaining for banks in this transition, he responded:
“With cross-border payments, it’s about the end-to-end processing of that payment instruction. If we initiate a claim at JP Morgan end-to-end with ISO, but another bank starts with the old MT format, we’ll have to convert it. Until every bank initiates with ISO, challenges will persist.”
Winther concurred, stating that the Nordic region has yet to fully adopt the necessary domestic systems. Still, she acknowledged the benefits of a harmonized and standardized approach.
Von Poser added to the conversation, identifying two main groups of barriers: those in the back office and the technology itself. He remarked, “In the EU, banks are realizing their systems have reached the end of their lifecycle. Continuing to build on outdated technology doesn’t make sense. Additionally, the shift to 24/7 technology presents challenges for legacy systems, affecting various aspects from payments to compliance.”
He noted that limited budgets compound these challenges and predicted that increased competition from alternative players will further complicate matters for banks.
In response, Williams brought up the critical balance between speed and security. While UK’s Faster Payments system efficiently handles low-value transactions, there are concerns about fraud, especially in high-value cross-border transactions. “Will we ever achieve instant high-value cross-border payments? Probably not,” he stated, noting that over 80% of JP Morgan’s dollar, euro, and pound payments are processed within 30 minutes, which he believes is sufficient for most corporates.
Transitioning to the B2B landscape, Curran inquired about missed opportunities for banks in cross-border business payments. Havander commented, “When we look at retail payments, banks have lost 54% to digital attackers, and now disruption is moving toward corporate payments. Understanding how banks are building resilience against these threats is vital. Many banks are exploring alternatives, indicating the need for change.”
From the bank’s perspective, Winther agreed with Havander that simplicity is essential. She highlighted the significance of understanding the actual needs in the context of real-time payments. “Faster payments might not be the ultimate goal; reducing complexity is crucial as it helps mitigate fraud,” she remarked, pointing out the need to distinguish between retail and high-value B2B payments.
Schwarz posed a potentially contentious question about the future of correspondent banking in light of instant payments. The panelists swiftly engaged with this topic. Winther acknowledged ongoing discussions, suggesting potential consolidation in the sector. Von Poser added that central bank digital currencies (CBDCs) introduce additional complexities, implying that while correspondent banking will persist, its dominant role may diminish.