While the processing speed between banks during a transaction has improved, there is still more to be done across the industry to make sure that customers can access their funds quickly and easily.
The G20, which includes major world economies, plays a crucial role in working together to solve global economic issues. Recently,the G20’s Financial Stability Board has been focused on ensuring that money flows smoothly around the world.
In 2020,they set specific goals to make international payments faster, cheaper, more transparent, and inclusive across different payment types. One of the targets is to process 75% of international payments within one hour by 2027.
Although the speed of processing payments between banks during flights has improved, there is still room for growth in ensuring that customers receive their funds quickly. Currently, only about 60% of wholesale payments make it to customer accounts within an hour. Delays often occur at the receiving bank due to factors like payment controls, batch processing, and operating hours of financial systems.
To meet the G20 targets, the industry must work together more globally, and local policies and infrastructure also play a significant part in achieving faster payment processing for end customers.
Cross-border payments, which involve transferring money between countries, are growing rapidly in the global payment industry. Experts predict that by 2027, these payments will surge by 66% to over USD 250 trillion.
This growth is fueled by factors like advanced technology, shifting consumer preferences, global movement of workers, and the expansion of global supply chains.
Despite efforts to handle the increasing volume of cross-border payments, there’s a challenge known as fragmentation.This means that there are differences in data standards and formats used by financial systems in various countries. As a result, sending payment messages becomes inconsistent, leading to delays and higher costs.
Enhancing Speed, Transparency, and Reducing Risks: Why Standardisation Matters
When it comes to making cross-border payments, standardisation is key for making things faster, more transparent, and less risky. By adopting a common messaging standard like ISO 20022, we can ensure that financial messages are exchanged in a uniform way.
This will help different platforms communicate seamlessly when handling cross-border payments, making sure that all parties involved understand the transaction data correctly. This reduces the chances of errors and mistakes.
ISO 20022 also allows payment providers to share more information in a structured way, which boosts straight-through processing (STP). This structured data not only helps in preventing fraud and financial crime but also speeds up transaction processing. As a result, payments are settled faster, and delays are minimized.
As more ways to transfer money internationally emerge, there are also more hurdles causing delays and higher costs for banks. But there are ways to improve this situation by making the payment process smoother and more efficient.
One way is by using new tools that check payment details before they are sent, reducing errors and potential issues. These tools look at past transactions to make sure everything is correct. If problems do arise, there are solutions available to simplify investigations and reduce costs for banks.
By adopting the ISO 20022 standard for payments, things can get even better. This standard will help make payments faster and more reliable.
In conclusion, the G20 Roadmap by the Financial Stability Board is a great start to improving cross-border payments. But it will take collaboration from everyone involved – policymakers, stakeholders, and the industry itself – to make it successful.
By working together and using innovative solutions, we can achieve faster, more transparent, and affordable international payments.This will improve global trade and economic growth for the benefit of people everywhere.