International Cross-Border Payment Sector Undergoing Transformation with Trillion-Dollar Valuation
In the world of finance, a renaissance moment is unfolding as the field of cross-border payments undergoes a significant transformation. This transformation is being driven by technological advances, a changing regulatory landscape, and the entry of new fintech companies.
Recently, the BIS Innovation Hub, in partnership with several central banks, unveiled Project Dunbar. This project focuses on testing the use of central bank digital currencies (CBDCs) for international settlements. The BIS Innovation Hub Centre in Singapore is at the forefront of this initiative, partnering with seven major global banks and fintech firms, including J.P. Morgan, Bank of America, HSBC, Barclays, Citi, Credit Suisse, and Temasek.
The central banks have been a catalyst for CBDC innovation. The Dunbar project is just one example of this, as another initiative, Project Nexus, aims to connect existing national instant payment infrastructures. This project is currently in a prototype phase with new partners.
The "instant" element of these projects includes real-time, 24/7 payments networks and infrastructures, standardized QR code payments, and proxy addresses. Eli Shoshani of Bottomline emphasized the need for service providers to focus on connecting gateways and fast payments locally into cross-border payments globally.
Fragmentation and regulation remain key challenges in modernizing cross-border payments. Efforts have been localized, and interconnectivity between different systems is necessary for improvement. Atul Bhuchar of DBS Bank, however, sees payments as a source of competitive advantage for businesses, particularly in the e-commerce boom.
The trillion-dollar cross-border payments market is undergoing a revamp. Infrastructures like Singapore's Fast And Secure Transfers (FAST) and the UK's Faster Payments Services (FPS) allow new players like Wise to provide more efficient and cheaper cross-border payment services.
The BIS, DBS Bank, Wise, and Bottomline discussed major trends, digitalization efforts, and challenges in the cross-border payments space at a recent panel discussion. Another partnership, Partior, is also working towards modernizing cross-border payments. Partior is a partnership between DBS Bank, JP Morgan, and state investment firm Temasek, seeking to develop an open industry platform for interbank value movements.
Partior is targeted to go live this year and will introduce multi-currency clearing as the first step, followed by cross-border payments, conditional payments, and other use cases in FX and trade. The goal is to make money movement intelligent, faster, cheaper, and more efficient by leveraging the native strengths of blockchain, such as programmability with smart contracts, traceability, instant and atomic settlements, and cost savings.
"Intelligent" payments refer to moving from a transactional nature to providing tailored advisory services. Venkatesh Saha of Wise believes that as consumers get accustomed to efficient and affordable services, it sets expectations for all online activities.
Andrew McCormack of the BIS Innovation Hub in Singapore stated that cross-border payments are experiencing a renaissance moment due to increased investment in digital disruption, fintech entry, bank efforts, and instant payment infrastructures by governments. The BIS Innovation Hub Centre in Singapore is advancing cross-border payments innovation through two main projects: Project Nexus and Project Dunbar. The pace of CBDC innovation around the world has been "phenomenal", according to Atul Bhuchar of DBS Bank.
In conclusion, the future of cross-border payments looks promising. With initiatives like Project Dunbar and Partior, the use of CBDCs for international settlements and the modernization of cross-border payments through blockchain technology are becoming a reality. As these projects progress, consumers and businesses can expect faster, cheaper, and more efficient cross-border payment services.
