CPMI's key areas of strategic focus and our contribution to better cross-border payments
Remarks by Tara Rice, Head of Secretariat, Committee on Payments and Market Infrastructures, at the 8th Annual European Payments Institutions Federation (EPIF) Conference "Delivering an integrated payment experience", Brussels, 15 November 2023.
Introduction
Hello, thank you for the invitation to speak with you today.* I would like to share with you some exciting developments in the Bank for International Settlements' Committee of Payments and Market Infrastructures (CPMI), its work programme, and its priorities into 2024.
The CPMI's main objective is to promote the safety and efficiency of payment, clearing, settlement and related arrangements, thereby supporting financial stability and the wider economy. What the Basel Committee on Banking Supervision is for the prudential regulation of banks, we are for payment, clearing, settlement systems, or what some refer to as the plumbing of the financial sector. We are a global standard setter in this area and aim to strengthen regulation, policy and practices regarding such arrangements worldwide.
The CPMI work programme
The work programme reflects a vast variety of topics which requires joint effort and/or close coordination with the International Organization of Securities Commissions (IOSCO), the Financial Stability Board (FSB) and other international bodies.
Let me start with a "house tour" of the CPMI to describe the main work done by our Committee. We have recently re-organised our house into three floors:
The ground or foundational floor houses the risk management of financial market infrastructures (FMIs), such as payment systems, securities settlement systems and central counterparties. This includes fostering the implementation of our standards, the Principles for financial market infrastructures (PFMI). This work relies on a layered coordination encompassing joint work with other standard-setting bodies and the FSB. In this area, the CPMI work programme, will cover central counterparties' (CCPs') resilience and recovery, margining practices in centrally cleared markets, cyber and operational resilience of FMIs and foreign exchange (FX) settlement risk reduction.
On the first floor sits the G20 cross-border payments programme. The first three years of the programme focused on stocktaking, analysis and developing guidance. In 2022, a strategic review of the overall programme structure, responsibilities and prioritisation was conducted. I will elaborate more on this in a moment.
Continuing to the top floor of the house, we have digital innovation and the future of payments. The objective here is to identify, analyse and respond to emerging opportunities, risks and issues related to digital innovations in payments. The current focus is on the (i) future of payments in a tokenised financial ecosystem, and (ii) the timing of international cross-border functionality in central bank digital currency (CBDC) design.
Up the stairs once more and into our attic study. This is where we conduct research and analytical work to support the work on all the three floors. The annual collection and publication of the CPMI statistics on payments and FMIs ("Red Book" statistics) and the yearly BIS CBDC survey are two of our flagship products. And recent work includes the creation of a stablecoin dashboard.
CPMI's leading role in the G20 cross-border payments programme
Let me turn back to cross-border payments. In 2020, the G20 made enhancing cross-border payments a priority. Improving and enhancing cross-border payments will have widespread benefits for citizens, businesses and economies worldwide. The CPMI and FSB, and other relevant international organisations and standard-setting bodies, developed a Roadmap to address the challenges that affect cross-border payments: high cost, low speed, poor transparency and limited access.
Since launching the Roadmap in 2020, much has been accomplished. During the first two years, the work focused on establishing the foundational elements of the Roadmap; the international bodies leading the Roadmap's various building blocks have published consultative or final reports offering specific proposals, best practices, or guidance across numerous elements.
In 2022, a strategic review of the overall programme structure, responsibilities and prioritisation was conducted.1 The focus was on the question of how to meet the end-2027 quantitative targets for cost, speed, access and transparency set by the G20,2 and whether implementation of the actions in the Roadmap (as originally designed) would result in meaningful enhancements to cross-border payments. The result of this review was a prioritisation plan and engagement model for taking the programme forward, which resulted in updating and revising the Roadmap. This was published in February 2023.3
It focuses the work on three priority themes: (i) payment system interoperability and extension; (ii) legal, regulatory and supervisory frameworks; and (iii) cross-border data exchange and message standards – across 15 priority actions.
Implementing actions and projects in support of these themes was determined to be the best way to achieve the targets that have been set for cross-border payments.
These actions reflect the tools available to CPMI, FSB and their partner organisations, as these bodies neither operate payment systems nor offer payment services to users on their own; this of course makes public and private sector partnership crucial. They also reflect the importance of global cooperation in sharing effective practices through capacity-building initiatives such as technical assistance and other channels. The CPMI continues to take a leading role in the implementation of many of the actions.
Alongside these actions, the CPMI will continue to monitor, identify and assess emerging issues in payments, clearing and settlement. The FSB's progress report and key performance indicators (KPI) report came out in October.4
In summary, we are making progress but there is more to be done; we are still quite some distance away from the G20 targets. And it shows that user experiences differ substantially across regions and market segments. This is why it is so important that all of you gathered here today, and your peers, commit to taking on board the recommendations and to playing an active role in the initiatives of the programme that are going to shape the cross-border payments of the future. After all, each of us as users of payment services will benefit from an improved cross-border payments landscape.
As our new CPMI Chair and Governor of Bank of Italy Fabio Panetta said in an FT op-ed recently, the world needs a better cross-border payments network.5 Governor Panetta continues that we need to provide safer and easily accessible alternatives that makes global payments cheaper, faster and more transparent.
Interlinking of fast payment systems – a promising avenue to achieve the G20 cross-border payments targets
There are several options but let me focus on one today.
We now have more than 70 domestic fast payment systems around the world, and plans for at least 20 more to be implemented in the next few years. By linking them together, the benefits of digitisation would extend more fully to cross-border payments.
Fast payment systems operate on a 24 hours a day, seven days a week basis, or close to it, and make final funds available to the payee in real time. Their development started prior to 2000, but the number of new systems has really taken off in the last five years.
There is also good coverage across both advanced and emerging market economies. And the operators of these systems are diverse, with around 40% operated by central banks, 35% by private sector entities, and the remainder by "other" entities such as those owned by a combination of a jurisdiction's central bank and commercial banks.
And, with the development of fast payment systems, we see an increase in the number of cross-border linkages between them.
Such interlinking is one of the most promising solutions for enhancing cross-border payments. Interlinking arrangements allow payment service providers of different jurisdictions participating in different payment systems to transact with one another as if they were participants in the same system, and thus, helping to increase the speed and reduce the cost of cross-border payments.
From the CPMI monitoring survey this year, we know of at least 14 fast payment systems that already allow participants to exchange payments with foreign payment service providers. And another 24 systems have plans to establish links within the next five years.
While this is great progress, it represents only about half of our survey respondents. More effort is needed across the globe to foster new interlinking arrangements. We need to be clear about what the pain points are to interlinking and to find solutions that will make a meaningful impact.
As we are approaching the end of the year, I would also like to talk about the topics on which the CPMI will be working in the near future. The CPMI is committed to delivering to the G20 next year a governance and oversight framework for payment system interlinking across borders. More on this report in a moment.
As we laid out in a report to the G20 last year, APIs play an important role in the interlinking of payment systems.6 Following the successful finalisation of the harmonised ISO 20022 data requirements in 2023,7 the CPMI has convened a panel of experts on the use of application programming interfaces (APIs) cross-border payments. We will publish a report on recommendations for greater API harmonisation for cross-border payments next year. However, technology is only part of the solution to successfully link two or more payment systems.
I would like to conclude by outlining the work that the CPMI is doing in the area of governance and oversight of fast payment system interlinking arrangements.
Agreeing on workable governance and oversight arrangements can be especially challenging due to the multi-jurisdictional, cross-border and/or cross-currency nature of these arrangements. For this reason, the G20 has identified the governance and oversight of cross-border payment system interlinking arrangements, in particular of fast payment systems, as a priority in helping to achieve its targets.
Last month we published an interim report to the G20 on the governance and oversight of fast payment system interlinking.8 This report sets out 10 initial considerations to better understand the sensitivities, complexities and experiences in this area.
The CPMI needs and is seeking your comments on the governance and oversight interim report in order to develop a final report which could be a useful reference for both payment system owners and overseers. The consultation closes 13 December. Your feedback will be very helpful in improving cross-border payments.
If successful in enhancing cross-border payments, collectively we can make a meaningful impact on people's welfare, and especially that of the most vulnerable, who rely on cross-border payment remittances as a source of income.
Thank you for the opportunity to speak with you today.
* Thank you to Alberto Di Iorio and Emilie Fitzgerald for their contributions to this speech and a personal thanks to David Bischoff and family for making the travel to Brussels possible.
This speech and the views expressed are those of the individual and do not necessarily reflect the views and/or position of the BIS or CPMI.
1 FSB, G20 Roadmap for Enhancing Cross-border Payments: Priorities for the next phase of work, October 2022.
2 FSB, Targets for addressing the four challenges of cross-border payments: Final report – Financial Stability Board, October 2021.
3 FSB, G20 Roadmap for Enhancing Cross-border Payments: Priority actions for achieving the G20 targets, February 2023.
4 FSB, Annual Progress Report on Meeting the Targets for Cross-Border Payments: 2023 Report on Key Performance Indicators, October 2023.
5 F Panetta, "The world needs a better cross-border payments network", op-ed, Financial Times, 31 October 2023.
6 CPMI, Interlinking payment systems and the role of application programming interfaces: a framework for cross-border payments, July 2022.
7 CPMI, Harmonised ISO 20022 data requirements for enhancing cross-border payments – final report, October 2023.
8 CPMI, Linking fast payment systems across borders: considerations for governance and oversight, October 2023.
