While instant payments, i.e. payments processing in real time, are hardly used in Europe, other economic areas are already much further ahead. The ASEAN countries see such payment methods as a location factor and promote them accordingly. They are also thinking beyond their national borders, and the first networks of different currency areas already exist. In view of the current normality of cross-border payments with their lack of transparency, slowness and high costs, a trend of where the future lies can clearly be seen.
Given the fact that almost all major economic areas worldwide have now brought their own instant payments systems to market maturity, the idea of connecting these networks is an obvious one. However, there are legal and technical hurdles in the way. Different data formats and fundamental differences in regulation make the setup of corresponding payments processes a challenge. Nevertheless, there are at least initial approaches, specifically NEXUS from the Bank for International Settlements, SWIFT gpi instant and IXB. The latter project initially provides for a corridor for real-time credit transfers between the euro and US dollar areas.
In addition, there is a whole range of alternative approaches that either turn cross-border payments back into domestic payments via an internal clearing mechanism and accelerate them in this way or utilise state-of-the-art technologies. These include blockchain or distributed ledger technology, such as Bitcoin or stablecoins. These systems are without borders and are at least in principle also suitable for cross-border instant payments.
Europe's financial institutions would do well not only to observe the developments but also to play a shaping role in order to be a first mover in the growing market for real-time credit transfers in cross-border payments. Our whitepaper "Global Instant Payments – An Ever-Growing Network" provides an overview of current developments and takes a look ahead.
