In 2020, the G20 leaders endorsed a roadmap to improve cross-border payments experiences and infrastructure.
The goal was to make cross-border payments cheaper, faster, more transparent, and accessible by 2027 — and now, we are about halfway through that time horizon.
In a sign of progress, the G20’s original five focus areas have shrunk to three.
Those three updated priorities underpinning the next phase of the G20’s cross-border roadmap are: payment system interoperability and extension; legal and regulatory supervisory frameworks; and data exchange and messaging standards.
Cross-border payments are the backbone of international trade but have suffered from historical frictions and legacy bottlenecks stemming from multiple disconnected systems and stakeholders, as well as isolated regulatory programs enacting siloed oversight.
But today’s end users, particularly business customers looking to grow internationally, are increasingly demanding interoperability and seamless payment capabilities.
By 2027, for example, the G20 is aiming for 75% of cross-border payments to be credited with the beneficiary within an hour.
Given the state of things in 2024, with cross-border payments traveling across far-flung tax codes and compliance requirements in different countries, with any number of parties and counterparties in the mix, that may sound like an ambitious — if admirable — goal.
Still, a drumbeat of advancements are transforming the foundations of international payments. And each innovation is helping bring the G20’s goals closer to reality.
Read more: Incentivizing Innovation Is Crucial for Transforming X-Border B2B Payments
The further payments travel, the greater the potential is for failure — but streamlined, standardized messaging helps aid straight-through processing for cross-border payments by eliminating many of the manual steps that go on behind the scenes that can otherwise hinder the speed of reconciliation.
As PYMNTS Intelligence has reported, 70% of U.S. firms experienced higher rates of failed payments in cross-border sales compared to domestic sales, per PYMNTS Intelligence research — and domestic sales failures already account for $89 billion as measured solely through the first three quarters of last year.
That’s why data exchange and messaging standards are a key priority for enhancing cross-border payments, and not just for the G20. It’s also why the pivot to ISO 20022, supplanting earlier formats, has been greeted warmly by cross-border hopefuls.
But as PYMNTS has written, the maximum efficiencies of data and messaging standardization can only be realized when everyone’s on board. And that onboarding is a different process, one whose maturity is nearly as fragmented as the existing correspondent banking network.
After all, the investment to migrate core banking systems over to the new standard is huge.
The Bank of International Settlements said in an October 2023 report that “the current inconsistency in the implementation and use of this international standard risks undercutting some of its benefits for cross-border payments,” and added that “Realization of the benefits of adopting these requirements will depend crucially on their widespread uptake. As such, market participants are encouraged to begin preparations to align with the harmonized ISO 20022 data requirements in earnest and by end-2027 at the latest.”
The U.S. is set to follow with ISO 20022 migration in April 2024 (CHIPS) and March 2025 (Fedwire).
See also: Interoperability and Transparency Are Key Challenges as Cross-Border Payments Modernize
Divergence in regulation is a major source of friction for cross-border payments, which is why collaboration among the private and the public sector is essential for progress.
Disconnects — and delays, even failures — can appear when it comes to the integration and compliance of cross-border payments with various anti-money laundering (AML), countering financing of terrorism (CFT) and data governance controls put in place by different governments whose private sector businesses are trying to transact with one another.
Still, things like API standardization can help to avoid payment system fragmentation. And as business models continue evolving toward digital and platformed-based structures, solving for cross-border payments will be critical to support worldwide economic growth.
“The cross-border B2B market is growing massively,” Neil Drennan, chief technology officer at Visa Cross-Border Solutions told PYMNTS in an interview posted in November. And that means there are more businesses than ever looking to move money around the world “quickly and transparently, with complete clarity around costs.”
Echoing that sentiment, James Butland, U.K. managing director at Mangopay, told PYMNTS in an interview posted Jan. 23 that there is a growing movement toward faster payments and interoperability which is expected to revolutionize B2B and cross-border transactions.
For further reading, “The Treasury Management Playbook: Spotlight on Cross-Border Payments,” a PYMNTS Intelligence and Citi collaboration, examines why cross-border payments are more important than ever and how companies can minimize frictions associated with international transactions.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More