Cross Border Payments - US Europe corridor

Recent news on Fed's initiative on cross border payments in US Europe corridor indicates high probablity of a new cross border payment standard, which may not be necessarily the international payment standard as being followed due to following reasons:-

1. European high value payments are highly inclined towards SWIFT standards with stringent european flavors (103+), IBAN, AML regulations on ordering customer information and Fincopy mode

2. European Bulk Payments in ISO20022 path with successful launch of SEPA Credit Transfers & proposed roll out of Direct Debits from Nov 09. Legal harmonization achieved through Payment Services Directive across participating nations. Regulation E and BSA AML regulations coupled with Code of Financial Regulations in US largely regulate the payments.

3. US Payments with regionalised standards and processes, not exactly SWIFT standards. Customer Transfer Request (CTR) formats mapping to ISO formats (Interbank pacs format) were published by SWIFT last year.

4. Proposed changes in Cover Payments (202COV) to be rolled out from Nov 09, the Federal Reserve Banks (FRBs) have completed and distributed specifications for banks transmitting cover payments through the Fedwire Funds Service and Chips, the US wire transfer systems.

5. Criticality of Mandates in Direct Debits from European context and optionality (requirement during stop pay instructions) in US context.

The move will enable Financial institutions for seamless information management and regulators for standardized information monitoring. Service providers can converge their solutions to common processes and standards to offer region agnostic payment engines with built-in common processes and messaging standards. 

Effort would invariably be required in mapping both regions' requirements to a commonly agreed global solution with either addressing requirements or questioning the very logic of some practices in these regions.At this juncture, the initiative indicates the on-going consolidation mode of compliance drive across market towards a common standard and practice in payment processes.