Swift's Contribution to G20's Cross-Border Payment Enhancements

Digitalization is driving the transformation of payment methods, with a particular emphasis on improving cross-border transactions as highlighted by the G20's collaborative efforts with the FSB and other entities since 2020. According to Swift's data, 84% of network payments are either directly conducted or involve a single intermediary, reports Paymentsdive. This data provides insights into the existing challenges in facilitating quicker payments to beneficiaries, as noted by the cooperative.

Thierry Chilosi, the Chief Strategy Officer at Swift, emphasized the significance of the G20's roadmap for advancing international payments. Recognizing the pivotal role these transactions play in global economic growth, Chilosi underscored the necessity of widespread industry cooperation to achieve concrete enhancements. The G20 has established four primary targets to be achieved in cross-border payments by 2027: reducing costs, enhancing speed, ensuring broader access, and increasing transparency. Of specific concern to international organizations is the efficiency and cost-effectiveness of remittances, given their crucial economic impact on migrants who frequently send money to family and friends abroad.

In addition to aiming for faster processing times, the G20's objectives include capping the global average cost of cross-border payments for retail users at 1% of the transaction value by 2027 and limiting the average cost for remittances to 3% by 2030. However, achieving the latter goal has proven challenging, with the World Bank reporting a global average remittance cost of 6.25% in the first quarter of this year.

Swift acknowledged that more efforts are needed within the industry to fulfill all four of the G20's targets. Presently, only 60% of "wholesale payments," typically significant institutional transactions, meet the one-hour goal for reaching customer accounts. Delays on the recipient's end are attributed to factors like regulatory processes, batch handling, and market infrastructure operating hours.

The G20 also aims to enhance access to cross-border payment options. The goal, outlined in the FSB's October 2021 report on goal-setting, is to ensure that financial institutions and end-users have at least one electronic cross-border payment option available by the close of 2027. Additionally, these organizations encourage payment service providers to promote transparency by sharing information about total transaction costs and expected fund arrival times.

Swift, for its part, offers end-to-end transaction visibility and payment pre-validation. The cooperative also provides cloud-based and API-driven connectivity choices for messaging and transaction services, as highlighted in the release.