The challenges and opportunities surrounding low-value cross-border payments were front and center at Sibos on Monday, as a panel of industry experts discussed various models, including correspondent banking, distributed ledger technology (DLT), and interconnected national systems.
In 2021, Swift entered the low-value payments market with the launch of Swift Go, enabling consumers and small to medium-sized enterprises (SMEs) to send funds quickly to any destination worldwide directly from their bank accounts. Jean-François Mazure from Societe Generale remarked that, while Swift has excelled in B2B payments for years, it is now crucial to extend its value proposition to the B2C and C2C sectors.
Gayathri Vasudev from JP Morgan acknowledged that banks had largely overlooked low-value cross-border payments until recently, presenting an opportunity for non-bank players. Traditionally, banks hesitated to engage with low-value transactions due to high wire transfer costs. However, Swift Go has made significant strides in addressing these issues by offering a more affordable and expedient option.
Petra Plompen of EBA Clearing introduced an alternative initiative known as immediate cross-border payments (IXB). Last year, EBA Clearing, Swift, and The Clearing House collaborated to pilot IXB with support from banks on both sides of the Atlantic. This service aims to enhance cross-border payments by leveraging the quickest domestic payment methods available.
Plompen noted that while the technology for IXB is sound, its success will depend on collaboration with user banks and strong regulatory alignment. Simon Ong from DBS provided insights from Asia, where efforts are underway to interlink national instant payment systems. He pointed out that, while technology isn’t a barrier, the varying regulatory frameworks among countries slow bilateral agreements.
Ong also challenged the notion that real-time payments are always required, suggesting that for many consumer and SME use cases, near real-time would suffice. Plompen concurred but acknowledged that the 24/7 accessibility of real-time payments is often an important advantage in cross-border contexts.
The panelists expressed strong opinions during a discussion on the dynamics between banks and fintechs. Mazure from Societe Generale anticipated a future where both sectors operate under the same regulatory framework, stating, "Same animal, same cage." Vasudev from JP Morgan pointed out that fintechs have thrived in the low-value cross-border payments market partly because banks were slow to act. However, she cautioned that this is changing, as traditional financial institutions are now making substantial investments to improve their offerings in this space.