Banks Take Cross-Border Payment Test to the Next Level | Payments Source

The idea that payments can cross borders using existing national instant payment networks has come close to reality.

The successful instant transfer of funds from the United States to Europe has taken place in recent weeks as part of the new Immediate Cross-Border Payments (IXB) initiative orchestrated by Swift, The Clearing House and EBA Clearing, the organizations said on Tuesday. .

The Society for Worldwide Interbank Financial Telecommunications, TCH and EBA Clearing said in a press release that they had collaborated to prove the feasibility of instant cross-border payments in a test involving 11 banks.

Bank of America, BBVA Group, Citigroup, HSBC Holdings, Intesa Sanpaolo Bank, JPMorgan Chase and PNC Financial Services Group directly participated in the proof of concept, in which banks exchanged messages to synchronize the transmission of test transactions sent between national instant payment networks on either side of the Atlantic, the statement said.

Societe Generale, ING Group, Deutsche Bank and Crédit Agricole also contributed to the design of the concept.

The effort highlights growing pressure on incumbent payments networks to modernize the experience of cross-border payments as fintechs and blockchain innovators like Ripple introduce faster and cheaper ways to send money globally.

IXB’s next step will be to test its instant solution for cross-border payments in other money transfer corridors, the statement said.

Observers say IXB could prove useful for certain types of payments, as consumer and cross-border payments continue to grow with the boom in the international gig economy and the increase in the global volume of trade payments. electronic communication between commercial buyers and suppliers.

“Because a cross-border payment solution is not suitable for all situations, there is room for innovation and new entrants to the space will each have a place to play,” said Erika Baumann, senior analyst at Aite-Novarica.

Typically, settlement times for cross-border payments sent through existing correspondent bank networks are uncertain as parties using disparate systems cannot confirm the arrival of funds in a universally accessible channel, Baumann said.

“It is also difficult to predict what the correspondent fees will be with the exchange rates, and when a second fee will be added. [to cover unexpected costs], it adds intangible costs of manual intervention and strains relationships, ”she said.

But the wire transfer options available to banks are evolving. Swift was deployed last year Go fast, giving banks a faster and lower cost cross-border payment option with its new Swift gpi technology, which is rapidly gaining traction, according to Gareth Lodge, senior analyst at Celent.

“Until Ripple, Swift and its bank owners didn’t really have any competition, but today there are dozens of them and Swift is much more agile. Swift gpi is now pretty much instantaneous for a lot of traffic and doing huge volumes, ”Lodge said.

IXB’s idea of ​​combining Swift’s broad connections to global banks with well-established national real-time payments networks brings impressive reach and overlap, Lodge said.

“In an increasingly real-time world, there must be a system better suited to the needs of instant cross-border payments,” he said. “TCH reaches about 60% of all US bank accounts, EBA is owned by the biggest banks in Europe and there is common ownership between the two.