Friday,21 June 2024

Banks aim for seamless global payments with ISO 20022 and technology integration

5 min read

By Genivi Factao

Opening up payment systems for wider usage and standardising with ISO 20022 will achieve speed, security, transparency and traceability in cross-border payments

In a recent dialogue organised by The Asian Banker, leaders in banking and technology discussed challenges in cross-border payments. The issues centred around how to manage multiple currencies, breaking monopolies, as well as government and private initiatives aimed at pushing for real-time cross-border payments.

Panellists included Sonja Davidovic, advisor with the Bank for International Settlements (BIS) and deputy director of the Monetary Authority of Singapore (MAS); Marc Recker, global head of product, institutional cash management at Deutsche Bank; Takeshi Kito, vice-chairman, Fintech Association of Japan; and Eli Shoshani, head of Asia Pacific at Bottomline Technologies. The session was hosted by Mathew Welch, The Asian Banker’s international resource director.

Shoshani highlighted the difficulties in handling  cross-border payments in Asia, particularly in dealing with 24 to 26 different currencies. He addressed the development of various payment rails like Visa’s business-to-business (B2B) and ISO 20022 standards, which challenges the  dominance of traditional payment systems like Swift.

He emphasised China’s efforts to establish its own rail for cross-border payments in Russia, India, Brazil, North Korea and Iran. He said: “Although their main trading currency is the Chinese yuan now, it will develop into another rail. So you can see that Swift is not the only dominant cross-border payment system.” 

ISO 20022 was discussed as a key enabler for harmonisation, seamless data transfer and interoperability between payment systems and regions, thus facilitating efficient and faster cross-border transactions.

Recker said: “The European Central Bank has made it mandatory that the real-time gross settlement Target2 in Europe be fully fledged—that means all European banks that are directly connected need to improve their backends to be fully-fledged ISO-compliant.”

The interconnected payment gateway in Europe is the Single Euro Payments Area (SEPA). Instant payment schemes and the adoption of standardised protocols are driving progress. Recker added that the European Payments Council had opened up SEPA for cross-border transactions as part of efforts to enhance the G20 Roadmap.

Kito discussed the challenges faced by Japan in connecting with global financial markets. The Japanese Bankers Association’s interbank network Zengin-net now allows fintech companies to use its system to facilitate peer-to-peer money transfers.

Davidovic presented the initiatives undertaken by the BIS to address issues such as slow speed, opaque payment legacy systems, limited access, monopolies, and constraints in the banking system. She described BIS collaborations with MAS, Bank of France, and Swiss National Bank in Project Mariana that explores decentralised finance in areas such as automated market makers to enhance foreign exchange trading and settlement. She added that Project Nexus, managed by BIS’s Singapore innovation hub, was as an example of streamlining multilateral linkages through a gateway connecting multiple jurisdictions.

The conversation touched on central bank digital currencies (CBDC) and the impact on the future of payments. While Davidovic sees major developments coming in wholesale CBDC in the medium term, she acknowledged that widespread retail CBDC implementation was going to be more complex.

Shoshani pointed out the evolving attitudes towards CBDC, noting how skepticism has given way to a more positive outlook, with the industry embracing these technologies. He recalled that 10 years ago, people were resistant to blockchain, Bitcoin and virtual currencies. He said: “Let’s adopt it. Let’s see what the benefit is for us. Instead of trying to fight it, let’s try to work with it and regulate it.”

Keywords: Payments, Real-time Cross-border Payments, ISO 20022, CBDC, Liquidity, Regulations, Interoperability, Decentralised Finance, Fx Trading, Settlements, Correspondent Banking, SEPA, Zengin-net, SWIFT, Migration, Project Nexus, Blockchain, Bitcoin, Digital Currencies, Cashless
Institutions: BIS, MAS, Deutsche Bank, Fintech Association Of Japan, Bottomline Technologies, ECB, IMF
Country: United Kingdom, Japan, China, Russia, India
Region: ASEAN, Europe
People : Sonja Davidovic, Marc Recker, Takeshi Kito, Eli Shoshani, Mathew Welch
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