At a November 2020 summit, a coalition of the world’s largest economies, the Group of Twenty (G20), tabled a
roadmap aimed at enhancing international retail, wholesale and remittance transactions. By 2021, working alongside the Financial Stability Board (FSB), the G20 issued a set of qualitative
targets – across access, cost, speed, and transparency – to guide financial institution (FI)s in their journeys. These targets are set for completion by 2027.
Here are four ways FIs can integrate the G20’s roadmap for cross-border payments into their strategies:
1. Foster interoperability between systems
Institutions cannot hope to satisfy the G20’s targets without updating the legacy systems that underpin payments. This may mean rationalising tech setups; removing unnecessary silos via application programming interface (API)s; introducing cloud and real-time
capabilities; automating repairs; settling disputes digitally; and optimising straight-through processing (STP).
However, a large part of the modernisation effort must be geared toward making domestic and international systems interoperable. One of the ways to achieve greater levels of interoperability is to align data frameworks across jurisdictions – supporting the
consistent and reliable flow of payments information. Such initiatives have the potential to boost the speed and efficiency of cross-border transactions – a pressing objective for the retail and remittance sectors, as global supply chains begin to fracture,
and geopolitics becomes increasingly unpredictable.
By addressing the challenges associated with data localisation and fragmentation, FIs also support anti-money laundering (AML) controls and other customer due diligence checks.
2. Open access to payments
The G20 roadmap is comprehensive – encompassing retail, wholesale and remittance transactions, and seeking to benefit entities of all sizes. With this in mind, FIs must work to broaden affordable, around-the-clock access to payment systems – especially for
small and medium-sized users.
One of the ways this can be done is to extend the operating hours of systems – driving flexibility and accessibility for cross-border payments. This would have profound advantages for international trade, which has recently taken a hit from shifting geopolitical
policies.
To drive access to payments, the FSB advises that by 2027, all end-users have at least one infrastructure or provider option available for sending and receiving cross-border electronic transactions.
3. Improve transparency
As per the G20’s guidelines, all payment service providers (PSPs) should offer payers and payees, at a minimum, the following three pieces of information:
- Total transaction cost (showing all relevant charges);
- Expected time to deliver funds; and
- Payment status.
If met, this will serve to enhance the richness, structure, and granularity of end-to-end payments – with clear and concise data shared with transacting parties.
4. Meet the ISO 20022 CBPR+ deadline
Finally, to meet the G20’s cross-border payments targets, FIs should ensure they retire MT messaging formats by November 2025. Put simply, compliance with ISO 20022 is imperative.
It is important to remember that the G20’s roadmap is merely an advisory for FIs, as opposed to an enforceable directive, as is the case with the deadline for migration to ISO 20022 Cross-Border Payments and Reporting Plus (CBPR+), in November 2025. When
this deadline is reached, the official MT-ISO 20022 co-existence period will end, and payments messages initiated in the legacy format, MT, may not be processed.
The good news is that, when FIs switch to the new messaging format, ISO 20022, greater levels of payments access, speed and transparency will be achieved across the payments ecosystem. Each of these objectives harmonise with those of the G20.
If migrations are successful, the remaining G20 roadmap goals – of reducing the global average cross-border payment cost to 1% of their value and ensuring 75% of cross-border transactions are available within one hour – are more likely to be met.
Over and above
By focusing on these key areas, FIs can effectively integrate the G20's roadmap into their strategies – building a more accessible, efficient, interoperable, and transparent cross-border payment system.
In order to go beyond the minimum requirements, FIs should continue to support the development of consistent legal and regulatory frameworks for cross-border payments. This may mean engaging with public sector stakeholders on policy refinement and implementation,
or collaborating with regulators to produce robust supervision frameworks for both bank and non-bank PSPs. Satisfying the G20 roadmap should inform each and every move.
Externally, FIs may wish to engage in reporting and communication efforts, to share their experiences with the ecosystem. Ultimately, the model should be one of continuous observation, learning, and informed decisioning – while remaining sympathetic to the
evolving needs of customers and the ever-changing landscape of the payments industry.