RTGS.global: Three Years On, Is the G20 Roadmap for Cross-border Payments Set to Usher in a New Spirit of Public-Private Collaboration?

The publication of the Financial Stability Board’s (FSB) latest progress report on the G20 Roadmap for Enhancing Cross-border Payments is imminent and highly anticipated by the payments industry. Public and private sector stakeholders alike are keen to see whether the ambitious programme for transforming cross-border payments outlined in 2020 is now truly transitioning from the wide-ranging landscape-mapping consultation and planning phase that occupied much of its first two years, to a phase marked by the implementation of practical initiatives, innovative solutions, and further public-private collaboration.

Public-Private Collaboration is Key to Driving Modernisation

Earlier this year, the FSB published a report setting out its priority actions for 2023 towards achieving the G20 targets for enhancing cross-border payments. That report identified three priority areas, which between them certainly suggest a move towards more specific, concrete, and practical initiatives. These are: placing a focus on improving payment system interoperability and extending real-time gross settlement system hours; mechanisms to promote efficiencies in the legal, regulatory, and supervisory environment for cross-border payments while maintaining their security and integrity; and facilitating cross-border data exchange and increasing the use of standardised messaging formats for cross-border payments.

Achieving these goals and delivering on the tangible outcomes outlined in the Roadmap by the intended 2027 target date will clearly require extensive collaboration between the public and private sectors. Every effort should now be made to achieve the quantitative targets set by the FSB to address challenges in the cost, speed, transparency, and access to cross-border payments.

The private sector has an important role to play. On interoperability and improving and extending real-time gross settlement hours, for example, the technical expertise and innovative thinking coming from private sector entities could render them a valuable ally for the public sector in achieving the Roadmap’s ambitions. Private sector players are also thinking creatively about new ideas and solutions for increasing and expanding adoption of payment-versus-payment (PvP) settlement through new mechanisms, another major goal of the Roadmap.

It will likely be private sector innovation that provides the key to unlocking faster, safer, more efficient, and less expensive cross-border payments. The private sector is well placed to advise on and illustrate the practicalities of how to improve the payments landscape from a commercial and operational perspective, as well as provide valuable context for the public sector to consider when assessing alignment of this to policies and regulatory practices. It is private sector firms who are more likely to be known for providing the novel creative thinking and innovative technological solutions that will drive modernisation and who will respond practically and effectively to the problems identified by the G20 in their 2020 report.

At RTGS.global, we have developed a cloud-based, cross-border inter-bank payment system, which uses bilateral atomic settlement capabilities to enable safe settlement of foreign exchange transactions. The PvP settlement RTGS.global facilitates makes it feasible for banks in different jurisdictions to source and deploy the currencies they need instantly, 24x7x365, in a transparent, safe, and efficient manner. This has the potential to make PvP settlement more available to the market for specific needs, be it for example in terms of speed, time of day, or currency pair.

Equally, however, to achieve the Roadmap goals it is incumbent on the public sector to foster involvement from the private sector and to include the private sector as much as possible in ongoing public sector initiatives and activities relating to the Roadmap, such as in the areas of PvP settlement, access policies for central bank accounts, and evolution of regulatory standards.

As the FSB itself has noted, private sector involvement and experience is, and will most certainly continue to be, an important part of the public sector's work. Now is the time for the public and private sectors to join forces in earnest to make the Roadmap goals a reality; this must involve a sincere commitment from public authorities and the private sector to work together towards a common goal.

The Importance of Regulatory Proportionality for New Innovation

In order to foster innovation, the FSB’s second priority area — the promotion of efficiencies in legal, regulatory, and supervisory arrangements — should take into consideration notions of proportionality: tailoring regulatory requirements to a firm’s size, systemic importance, complexity, and risk profile.

Inevitably, regulation of high-value cross-border payments will need to be sufficiently stringent to ensure financial stability and protect against systemic risk. However, a balanced approach, which lays a pathway for new solutions but does not sacrifice necessary protections for the market is, we believe, possible.

What we propose to best enable advancing the Roadmap goals are policies and regulations that are thoughtfully designed and applied, which appreciate the need for fresh perspectives whilst also being fit for purpose. Regulators will no doubt be mindful that simply employing existing policies and regulations in a blanket fashion, without consideration as to whether they truly meet the goal of ensuring safety in how a specific service or solution operates, could prove unduly onerous or create compliance difficulties such as to deter useful innovation. We urge regulators to adopt a measured, risk-based approach when considering new cross-border payment models, to ensure applicable policies and regulation are proportional to the risk.

Speaking in 2019 at a Financial Stability Institute event, Agustín Carstens, General Manager of the Bank for International Settlements, acknowledged that effective financial sector regulation should be proportionate, holistic, and coordinated at the global level. He argued that greater cooperation between regulators and innovators seeking to enter the market would increase the appetite for more proportionality in regulatory action. He also welcomed the establishment of controlled safe spaces where organisations could test and evolve innovative products and business models, free from major regulatory barriers but still under regulators’ supervision.

These “regulatory sandboxes” are just one example of how the industry can adapt to and accommodate new technologies, and embrace innovation, without sacrificing the necessary safeguards to ensure a reliable and well-functioning cross-border payments ecosystem for all.

Conclusion

RTGS.global has taken up the FSB’s call to action and is working hard to advance the goals of addressing the high cost and inefficiencies still challenging cross-border payments, and the frictions in existing processes that contribute to them. To foster innovation, but without opening up new risk, RTGS.global would welcome a nimble and supportive, yet thoughtful, regulatory approach from central banks which considers proportionality of scope and application, taking into account an FMI’s role and activity within the context of cross-border payments.

About the Author

Jarrad Hubble was appointed CEO of RTGS.global in May 2023. Jarrad leads the organisation’s ambitious plans to develop and expand over the coming months and years. Jarrad is an experienced commercial leader with over 20 years in senior roles across fintech and investment banking. He has led the global expansion of foreign exchange and international payment businesses, driving go-to-market strategies and the development of sales teams.

About RTGS.global

RTGS.global is the next-generation settlement service delivering real-time cross-border payments and liquidity management. Our service reimagines how settlement occurs in the interbank foreign exchange market, enabling counterparties to settle trades instantly, bilaterally, and without settlement risk — 24/7/365.