Singapore, UK and Canada central banks issue joint report on cross-border payments

THE central banks of Canada, Britain and Singapore on Thursday jointly released a report on cross-border payments and settlements, which provides a framework for assessing transactions in greater depth and discusses how alternative payment models can be implemented.

In the report, "Cross-border interbank payments and settlements: Emerging opportunities for digital transformation", the Bank of Canada, Bank of England and Monetary Authority of Singapore (MAS) examined three models of cross-border payments. They were supported by a group of financial institutions led by HSBC Bank and including OCBC Bank, the Toronto-Dominion Bank, UOB and Payments Canada.

Two of the models examined are built on existing domestic interbank payments using traditional technology, while the third uses wholesale central bank digital currency and its various applications through distributed ledger technology.

The report concluded that the models could be used to improve access, speed and transparency of cross-border payments, but would require more work from industry and regulators to develop the models further. The banks added that future projects could focus on implementation and policy challenges.

Sopnendu Mohanty, chief fintech officer at MAS, said: "Payments infrastructure has rapidly improved over the last few years. Domestic transfers can now be completed almost instantly and at low cost. With this as an aspirational benchmark, there is a huge opportunity to improve cross-border payments. This collaborative effort by the central banks and financial institutions across the three jurisdictions helps us identify gaps and areas of improvements in cross-border payments, and sets the foundation for further technical experimentation."

Scott Hendry, Bank of Canada senior special director of financial technology, noted that the cross-border payments space has significant room for improvement.

"Major changes are being proposed by current service providers as well as startups that regulators need to research to better understand. This project was a major step forward in international cooperation and in our understanding of the possible alternatives," he said.

Victoria Cleland, Bank of England executive director for banking, payments and financial resilience, said the strength of financial systems depends on the ability to make secure and efficient payments, and many national payment systems are already benefitting from innovation and change.

"In this context it is important that cross border payments, which totalled 1.8 times global GDP (gross domestic product) in 2016, are enhanced too. They are at the centre of the international financial system, enabling trade, investment and money transfers," said Ms Cleland. "This report, which is itself a great example of international collaboration, provides a foundation that will enable further exploration of how innovation could improve this crucial aspect of finance."