Discussions and Debates from Zero Point Forum
The cross-border payments landscape is undergoing a significant transformation, with key trends shaping both opportunities and challenges. At the heart of this transformation is the Bank for International Settlements' (BIS) Project Nexus, a leading initiative aimed at enabling faster, cheaper, and more transparent cross-border payments.
Project Nexus seeks to connect different countries’ payment systems into a unified network, promoting system interoperability through standards like ISO 20022 and open industry collaboration. Ongoing tests in Asia, involving countries like India, Singapore, Malaysia, Thailand, and the Philippines, demonstrate its potential impact.
Cost pressures are addressed by Project Nexus and blockchain-based systems by removing intermediaries and improving operational efficiency, lowering fees especially for Small and Medium Enterprises (SMEs) and individuals sending frequent payments. Transparency improves through technologies like blockchain and digital currencies, providing immutable, real-time ledger records visible to senders, recipients, and regulators, reducing disputes and increasing trust in cross-border settlements.
Speed advances via real-time payment networks such as Project Nexus, SWIFT GPI, and blockchain platforms like Ripple, allowing near-instant settlement previously unattainable with legacy correspondent banking. Artificial intelligence (AI) and machine learning (ML) enhance cross-border payments by improving fraud detection, risk management, and regulatory compliance through real-time analytics of vast transaction data.
Stablecoins and Central Bank Digital Currencies (CBDCs) are increasingly critical. CBDCs support instant virtual cross-border payments with central bank backing, while stablecoins provide digital dollar liquidity and compliance in international transactions, helping bridge traditional finance and new digital rails.
However, challenges remain. Interoperability is a key concern, with Nexus’s “one connection” model and adoption of global data standards facilitating cross-border system compatibility. Regulation remains complex due to diverse jurisdictional requirements for Anti-Money Laundering (AML), Know Your Customer (KYC), and data privacy, which slow instant payment adoption and increase compliance costs.
The future landscape is shaped by collaborative technological innovation (Project Nexus, blockchain, APIs), digital currency adoption (CBDCs, stablecoins), enhanced transparency and speed, AI-driven security, interoperability standards, and evolving regulations that together promise more efficient, secure, and inclusive cross-border payments worldwide.
This transformation was the focus of the recent event 'Evolution of cross-border payments: Next-gen solutions', organised by Elevandi in partnership with the BIS Innovation Hub, the Monetary Authority of Singapore, and the Swiss National Bank. The event brought together experts, central bank stakeholders, industry commentators, and innovators for in-depth discussions on the potential shift from Web 2.0 to Web 3.0 in the context of the industry's development.
The panel, moderated by Arjun Vir Singh, Partner & Global Co-Head of Fintech at Arthur D. Little, discussed the importance of the right technology for the right use case, highlighting the significance of partnerships in cross-border payments. Adoption of solutions is critical, requiring meeting users where they are and coordination on a global and regional basis. Regulation is a challenge, particularly on the consumer side, with the best approach being to adapt existing regulations to keep up with the pace of change.
Quantum computing, while still emerging, poses future challenges and opportunities—potentially enhancing cryptographic security but also threatening current encryption methods, necessitating advancements in quantum-safe protocols. However, no specific large-scale deployment has been noted yet, but it is a strategic technological consideration.
In conclusion, the future of cross-border payments centres on collaborative technological innovation, digital currency adoption, enhanced transparency and speed, AI-driven security, interoperability standards, and evolving regulations that together promise more efficient, secure, and inclusive cross-border payments worldwide.
- The panel, during the event 'Evolution of cross-border payments: Next-gen solutions', emphasized the significance of technology in cross-border payments, specifically the importance of utilizing the right technology for the right use case, indicating a need for further partnerships in business and technology.
- As bank regulators continue to navigate complex challenges such as AML, KYC, and data privacy, education-and-self-development in understanding these regulations will be crucial for fostering growth and innovation in the cross-border payments landscape.
