By Elena Malykhina
Nearly all real-time payment systems today work domestically—that is, enabling instant payment within one country. But a growing number of initiatives worldwide are in the early stages of testing cross-border real-time payments in different currencies.
There are already some instances where real-time payments have been successfully carried out between countries. In 2017, the European Payments Council launched the SEPA Instant Credit Transfer (SCT Inst), a scheme that enables pan-European credit transfers with the funds available in less than 10 seconds. Approximately half of Europe’s payment service providers (PSPs)—more than 2,000 of them—have already joined.2
Observers note that there are some drawbacks to SCT Inst, however, which have prevented widespread adoption by businesses.3 First, it doesn’t support payments in currencies other than euros. Second, it currently only allows transfers of up to 15,000 euros between accounts. However, some suggest this might change as the scheme evolves and new features are implemented.4
While SCT Inst might be a major initiative, the fact is, many countries—and entire regions—are recognizing the need for real-time cross-border payments. More than 40 real-time payment programs are now active globally—nearly three times as many as there were in 2014, according to a Forbes analysis of five annual Flavors of Fast reports from FIS.5
The report identified additional payments programs that are currently under development, including one in the U.S., which lags behind other regions, such as the U.K. The U.K.’s Faster Payments Service provides almost immediate transfer and availability of funds between participating banks. Experts believe that a similar service could greatly benefit U.S. small and midsize enterprises (SMEs)—79 percent of which are interested in settling payments in real-time.6
Beyond Europe, a transformation is taking place across the entire Asia-Pacific region to modernize existing architectures with the goal of achieving real-time payments connectivity between the Association of Southeast Asian Nations (ASEAN) countries.7 Payment systems operators from five ASEAN countries—Thailand, Vietnam, Malaysia, Singapore, and Indonesia—signed a memorandum in 2017 to interconnect their real-time payment networks.
Of all the countries in the region, Singapore’s real-time payments infrastructure is at a more mature stage compared with others,8 but some suggest there is a lack of interoperability due to limited governance and ownership of the infrastructure.9
Digital currencies and distributed ledger technology (DLT), such as Blockchain, could make up for existing shortcomings of Singapore’s electronic payments, as well as others around the world. DLT—a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions10 —may be optimal for B2B payments, since it eliminates the need for a third-party intermediary.
The Monetary Authority of Singapore recently conducted a cross-border payments pilot with the Bank of Canada, wherein they were able to connect their networks and enable direct payments using DLT.11 The two central banks also published a report that proposes several design options for cross-border settlement systems and builds on the trial’s findings to improve international payments.12
Meanwhile, the European Central Bank and the Society for Worldwide Interbank Financial Telecommunication (SWIFT) completed an extensive trial involving a group of banks using the Target Instant Payments Settlement, or TIPS, platform,13 which allows banks to instantly credit recipient accounts. The trial was designed to demonstrate how SWIFT’s global payments innovation (GPI) can work on the platform.
GPI is an initiative launched by SWIFT to help businesses worldwide receive faster payments directly from their banks. SWIFT has conducted similar pilots for cross-border payments with banks in Australia, China, and other countries since 2017.14
Experts suggest that, while promising, faster payments services come with a set of potential problems, including communication between different systems. International payments are often delayed due to local clearing systems that vary from country to country, making interoperability challenging.15
SWIFT envisions further improvements through TIPS, which aims to reduce the time of crediting payments to seconds.16 However, making real-time cross-border payments as smooth as domestic ones will require “modern, open, globally adopted standards,” SWIFT said in a recently published report.17
According to The Clearing House—a U.S.-based payment system infrastructure that operates an electronic settlement and wholesale funds-transfer system—cross-border instant payment schemes must develop alongside common frameworks to operate successfully in various countries.18 Consistent business processes and messaging standards are also needed to ensure system interoperability.
Some observers think there might be help on the horizon: the ISO 20022 electronic data exchange standard could provide a common framework for the development of payments messaging.19 Industry experts believe ISO 20022 should be phased in gradually and used alongside other standards and formats to promote adoption.20
Real-time cross-border payments would become more possible with the creation of a globally accessible payments system offering immediate money transfers regardless of country or currency. While such a system doesn’t currently exist on a worldwide level, progress is being made across the globe to achieve interoperability of real-time payments.
Elena Malykhina is professional writer who has covered science, technology and business for more than 10 years. Her work has appeared in InformationWeek, Scientific American, Newsday, The Wall Street Journal and Adweek, as well as through the Associated Press.
1. Real-time payments are changing the reality of payments, Deloitte; https://www2.deloitte.com/content/dam/Deloitte/us/Documents/strategy/us-cons-real-time-payments.pdf
2. “SEPA Instant Credit Transfer,” European Payments Council; https://www.europeanpaymentscouncil.eu/what-we-do/sepa-instant-credit-transfer
3. “SCT Inst: gaining traction one year on,” BankingTech.com; https://www.bankingtech.com/2018/11/sct-inst-gaining-traction-one-year-on
5. “Payments Are Moving To Real-Time Around The World, The U.S. Plays Catch-Up,” Forbes; https://www.forbes.com/sites/tomgroenfeldt/2018/10/10/payments-are-moving-to-real-time-around-the-world-the-u-s-plays-catch-up/#686c98793a33
6. “Security In The Time Of Faster Payments,” PYMNTS.com; https://www.pymnts.com/news/faster-payments/2019/security-risk-faster-payments
7. ASEAN Initiatives Seek to Leverage Real-Time Payments for Innovation, Ovum; https://www.aciworldwide.com/-/media/files/collateral/trends/asean-initiatives-seek-to-leverage-real-time-payments-for-innovation.pdf
8. “Local Perspectives: Real-Time Realities Across Asia-Pacific in 2019,” ACI Worldwide; https://www.aciworldwide.com/insights/expert-view/2019/march/real-time-payments-across-asia-pacific-money2020-asia
9. “Local Perspectives: Real-Time Realities Across Asia-Pacific in 2019,” ACI Worldwide; https://www.aciworldwide.com/insights/expert-view/2019/march/real-time-payments-across-asia-pacific-money2020-asia
10. “Distributed Ledger,” Wikipedia; https://en.wikipedia.org/wiki/Distributed_ledger
11. “Recommended by MAS, Bank of Canada trial could herald cheaper, faster and safer cross-border payments,” The Business Times; https://www.businesstimes.com.sg/banking-finance/mas-bank-of-canada-trial-could-herald-cheaper-faster-and-safer-cross-border-payments
12. Enabling Cross-Border High Value Transfer Using Distributed Ledger Technologies, Accenture; https://www.accenture.com/_acnmedia/PDF-99/Accenture-Cross-Border-Distributed-Ledger-Technologies.pdf
13. “European banks sign up to gpi trial on TIPS,” BankingTech.com; https://www.bankingtech.com/2019/05/european-banks-sign-up-to-gpi-trial-on-tips
14. “European Banks Trial SWIFT’s Instant gpi,” PYMNTS.com; https://www.pymnts.com/news/faster-payments/2019/europe-banks-trial-swift-instant-gpi
15. “Making Instant Payment Schemes Universal And Interoperable,” PYMNTS.com; https://www.pymnts.com/news/faster-payments/2019/interoperable-real-time-cross-border
16. “SWIFT trials instant cross-border gpi payments through TIPS,” SWIFT; https://www.swift.com/news-events/press-releases/swift-trials-instant-cross-border-gpi-payments-through-tips
17. Payments: Looking to the Future - Instant, Accessible, Ubiquitous, SWIFT; https://www.swift.com/future-of-payments
18. “Is a Global Real-Time Payment System Possible?” The Clearing House; https://www.theclearinghouse.org/banking-perspectives/2015/2015-q3-banking-perspectives/articles/global-real-time-payments
19. The ISO 20022 Adoption Initiatives Report; ISO; https://www.iso20022.org/sites/default/files/documents/adoption/ISO20022_adoption_report.pdf
20. “Making Instant Payment Schemes Universal And Interoperable,” PYMNTS.com; https://www.pymnts.com/news/faster-payments/2019/interoperable-real-time-cross-border