Private Sector and Messaging Standards Target Cross-Border Interoperability Challenges

As faster payments schemes take shape around the globe — in the U.S., the FedNow® Service is the latest example — realizing the full potential of speed and lower costs demands interoperability.

Regulations and frameworks are still emerging, and there are a number of private sector and public sector initiatives and infrastructures that will, together, enable payments to flow more easily, internationally, between bank accounts.

For network interoperability to take shape, payment schemes need to “exchange” data and information with one another, and this process is made easier by standardizing the actual messages themselves.

ISO 20022, the global and opening messaging standard, will provide a tailwind for more direct (indeed, straight through) processing of cross-border payments.

But the deadline for implementing the standard has been postponed and staggered across various regions.

In only one recent example, the European Payments Council postponed SEPA’s migration to the standard to March 2024, where the deadline had been next month. Earlier this year, The Clearing House (TCH) rescheduled the CHIPS ISO 20022 implementation from next month to April 2024.

Collaborative Efforts

Last September, the European Third Party Providers Association, a European trade group, presented its European Retail Payments Framework to the European Central Bank and the European Commission.

A noteworthy feature of the proposal was the suggestion for banks and FinTechs to use existing building blocks for instant retail payments instead of trying to introduce a new solution to the market.

Separately, the Faster Payments Task Force has been focused on improving B2B payments, promoting the ISO 20022 standards.

Vice Chair for Supervision Michael S. Barr said in remarks at a conference in Washington D.C last week that “international collaboration and coordination are often essential in payments systems.” The comments come against a backdrop where the Basel-based Committee on Payments and Market Infrastructures earlier this month introduced its own standards on how to “harmonize” ISO 20022 data requirements.

Among other efforts, Brazil and Argentina are reportedly exploring a “currency union” for executing trade payments between the two countries.

Joint research from PYMNTS Intelligence and Payoneer, in the report “International B2B Payments: A Guide for Entrepreneurs and Digital Businesses,” found that only 23% of small businesses find their current cross-border payment solutions are “very or extremely satisfactory.”

In an interview with Karen Webster, Diane Offereins, executive vice president and former president of payment services at Discover Global Network, said that interoperability is becoming increasingly important. Partnership models, for example between Discover, providers and payment networks, can improve international fund flows.

And in yet another announcement, money transfer firm Wise and global messaging platform Swift launched a cross-border payment partnership in September, geared toward providing financial institutions and their customers with more cross-border options. The Wise Platform will tap into Swift capabilities such as cloud and API connectivity and payment pre-validation, and include a payments “status tracker.”