The pace of faster payments innovations is getting, well, faster. Particularly for use cases such as P2P payments, real time or near real time clearing solutions are being rolled out frequently. One area that is taking longer, however, is the practical implementation of a cross border solution for international money movement. Banking Technologies outlined what some of those hurdles are:
Cross-border transactions are even more challenging. For faster payments to happen, countries need to build new domestic infrastructure that suits their needs and requirements. At the same time, that new infrastructure has to be compatible with the global payments infrastructure if the desire is to make faster payments across borders. This will require a substantial amount of cross-national consultation and collaboration.
Furthermore, the new technologies needed for faster payments are not yet mature. We do not yet know enough to determine the accuracy, quality and availability when settling high volumes of transactions. This creates a level of uncertainty that is typically uncomfortable for traditional banking institutions. At the moment, there is familiarity with systems such as the SWIFT network. However, once banks start imposing a real-time layer on systems, there are some unknowns. What can these systems handle? Will they be robust enough? What are the breaking points? These are all big questions that financial institutions will want a level of surety around before taking the next step.
As the article points out, reliability and scalability are real questions. I would add to that, a real business case. What is the value for a corporation to receive funds from an overseas client a day earlier? I am sure the added liquidity has some value, is it enough for all financial institutions to reinvent their entire infrastructure?
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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