Media Appearances

World Economic Forum: How Decentralized Finance Will Transform Business Financial Services

Decentralized finance (DeFi) is emerging as a tool for smaller businesses in developing markets, particularly for remittances and small loans; the transaction banking industry is beginning to see DeFi’s potential to overhaul the inflexibility of present processes; uptake of DeFi in transaction banking could open up new capital opportunities for larger companies and increase liquidity for SMEs.

Decentralized finance had a resurgence last summer. Cryptocurrencies like bitcoin and ether are now becoming more widely accepted for payments and USD Coin (USDC) has made significant progress towards being an asset that will maintain its value without future depreciation.

At the same time, the blockchain technology that underlies cryptocurrency and its supporting financial infrastructure are on their way to offering a system of financial rails in parallel to – and connected with – traditional financial infrastructure.

Both Coinbase and Compound Treasury have released USDC-based loans that guarantee at least a 4% yield (far higher than traditional products of a similar risk), and smaller platforms are offering cross-border access to capital with rates that are far more variable but would be unavailable otherwise. So far, this growth in loan products has come from the retail sector: individuals holding and trading crypto-assets for personal use. Banks such as Morgan Stanley and US Bank now offer crypto-products for their wealth management clients. But what about businesses?

Since its inception, DeFi – literally decentralized finance or blockchain-based forms of finance that do not rely on centralized intermediaries such as banks – has been adopted to some extent by smaller businesses in developing markets whose needs are unmet by the traditional banking system. For example, some businesses use payment companies like BitPesa in Africa, Tranglo in ASEAN and the major DeFi exchanges to either make direct payments or convert payment amounts to USD-backed stablecoin for cross-border remittance.

The greater transaction banking industry now sees DeFi as a potentially significant growth engine and disruptive force. Transaction banking addresses the operational needs and day-to-day transactions of businesses and financial institutions. Usually, only companies who are top customers of banks are able to have ready access to these services, which focus on managing the liquidity of a company, cash flows, trade and supply chain finance and other instruments needed to facilitate domestic and international corporate transactions. In 2020, industry-wide transaction banking revenue reached $1 trillion.

According to Samantha Pelosi, SVP of Payments and Innovation at BAFT, the largest trade association for transaction banking: “The potential efficiency gains and democratization of finance associated with DeFi are attractive to traditional financial institutions. However, DeFi negates the need for relationships with trusted intermediaries, which makes the model disruptive and somewhat alien to these banks.”

Virtually all major international commercial banks have at least piloted the use of blockchain for transaction banking services – which remain slow and cumbersome – but none of these pilots have involved DeFi. Rather, they focus on making bank processes more efficient and replacing traditional financial instruments with standardized digital assets. That means the approval and execution of transactions still ultimately go through the framework of traditional banking or more established fintechs. For example, a business’ credit risk is assessed based on financial statements and only applies to that specific business, without the ability to distribute risk across its system. The infrastructure around client support is also quite extensive, which means clients cannot be serviced without a high threshold cost. These practices hamper capital opportunities for larger enterprises and freeze out SMEs.

DeFi platforms provide an alternative system, not simply a plug-in to existing banks. Their decentralized nature means transaction onboarding and market-based risk assessments are much easier to scale across a business’ wider system because access to relevant information is not dependent on centralized processing or a prior relationship. Prior to DeFi, a business would have to complete anti-money laundering and “know your customer” checks for every source of capital and convince their counterparts to onboard to the same transaction banking programmes. They also would not be able to present evidence of performance on their debt or payables outside of financial statements.

DeFi allows for the exchange of trustable data across a system, mitigating these barriers to business financial services. Until now, however, most companies did not seriously consider DeFi as a viable alternative to their bank’s services because of the volatility of crypto-assets, regulatory uncertainty and the immature technology involved. Even Tesla’s purchase of $1.5 billion in bitcoin was motivated by the direct financial value of bitcoin as an asset, not by its transaction banking needs.

While DeFi previously solved the complex requirements around portable digital ID for businesses and has a roadmap for providing access to financial performance track records in transaction banking, it completely lacks two crucial elements: a one-to-one exchange with fiat currency; and interoperability between different blockchains so that counterparties could freely interact with one another. The former is necessary for cryptocurrency to offer a stable store of value that can be used as currency and to have an easily accessible interface with the traditional financial system. Interoperability is crucial for transactions to occur at scale in the highly fragmented blockchain space.

TXF News: BAFT: One Hundred Not Out

Via TXF News

One hundred years of an international trade body was a virtual party not to be missed. TXF spoke to Tod Burwell in the wake of the Bankers Association for Finance and Trade’s (BAFT) centennial celebration to find out what has been the secret of the trade organisation’s longevity, how it has helped moved international trade in a positive way, and what excites the organisation’s President and CEO about the future.

Interestingly, in the Articles of Association of BAFT in 1921, it was established to provide a medium by which its members may interchange opinions and establish uniform systems for the conduct of foreign business, “to urge the passage of wise and useful legislation and to oppose the enactment of prejudicial laws’ and to aid the development and maintenance of foreign trade.” That was back when BAFT was the Bankers Association of Foreign Trade, and it was purely a US organisation. It’s been fully global for a long time now, but those goals remain.

TXF: What’s the recipe for surviving 100 years and helping finance a century of global change?

Tod Burwell (TB): At the association’s 100th anniversary celebration I sat down with some of the chairs from the past 25 years who shared the issues they faced at the time and what BAFT did. What struck me was that there were always significant issues and significant challenges, whether that was 9/11, a debt crisis, the global financial crisis, or some other issue that was affecting the entire industry.

And as chair of the industry association, the challenge was how do we rise to the occasion to help support members. That remains what powers and motivates all of us as a staff, as a board and as an industry. The balance of the centenary conference was forward-looking – although we did cover BAFT’s history – there was a sense of being in the new century.

The economic axes of the world have been shifting, as has geopolitics. The pandemic has really accelerated some of the trends that were taking place before, whether it’s digitization, the implications of changing trade lanes, digital currency, etc. When I think about our role, we have to remain keen to the problems and challenges that our members are facing and the way we provide tools that will help them transition.

TXF: Are banks still the chameleons you characterised them as being in 2019 [before the pandemic]?

TB: The theme this year was more about the network and the importance of the network in connectivity. That was in a lot of ways brought on by the pandemic. When we talk about change, the first overriding theme is how we used to work before, forget it! That’s not how we will work going forward. Everyone has had to adjust how they how they go about their business, and their daily lives. CEOs and regional CEOs at our conference talked about how organizations are adapting for the next 10 to 20 years, whether that’s having hybrid work arrangements or how they are truly committing to diversifying the workforce.

Sustainability has been a topic for the past couple of years, but it’s become much more urgent now. And if you think about the workforce and the next generation of leaders, it’s part of their DNA. The expectation is that organizations are going to have to be environmentally and socially conscious and they’re going to have to be inclusive and diverse. And if you’re not, then you’re not going to be able to get the talent to drive your business. It wasn’t explicitly said, but the sense that I was getting is that organizations are changing because the people in them are changing.

TXF: One of secrets of evolution that has been important for BAFT is bringing up the next generation of trade bankers to hand on the baton through the Future Leaders program – can you tell us more?

TB: This has been one my personal favourite endeavours since I’ve been at BAFT and I’m super proud of having been part of this. It’s powerfully important that we as an industry prepare for the transition of leadership. We had our sixth class of Future Leaders just complete five projects and we’re a month away from preparing for our seventh cohort. We’ve already had the opportunity of seeing some of our Future Leaders becoming heads of transaction banking, or becoming members of our board of directors and to go on to do great things.

I sit on the board of an executive education program and we were discussing the curriculum for the next group of executive leadership development. The topics that were being discussed were exactly the topics that BAFT Future Leaders just spent 16 weeks looking into. It will be interesting to hear the takeaways from the executive leadership on those same topics and be able to compare and contrast with the findings of the BAFT Future Leaders class of 2021. We’re excited about continuing this program. This year was our largest class, with participants from several new countries. It continues to grow and we look forward to taking it to the next level.

TXF: You mentioned environment, social and governance (ESG) and diversity and change which have been themes of the event and how to secure for the next 100 years. How is the ‘S’ – social – working together with the other elements of ESG in BAFT?

TB: Initially, when environmental issues and climate change started to come into the banking sector the focus was really on green bonds and how does a bank finance and enhance certain sectors versus others. Over the past year or so the transaction banking industry has found ways to better service their clients because their clients have taken on ESG much more assertively, much more aggressively in some cases.

European regulators have been one of the early ones to lay out some benchmarks for the industry, but it’s been the private sector that has really driven this much more so than government policy over the past couple of years. The banks have found that they need to be very active and capable to serve the interests of their clients.

One bank CEO told me that around 70% of their clients have some sort of ESG initiative and that becomes part of their regular conversations. The shift has now started to move from the E to the S. And I connect this in some ways with the growing emphasis on DE&I [Diversity, Equity and Inclusion] as well. But it’s got a very regional or local flavour to it because the role for organizations in society depends on which society you’re talking about. One of the Future Leaders projects looked at sustainable finance, and another looked at DE&I. These are global issues, but the takeaway was that the needs of the market and the focus of the market varies drastically by localaity. And so not just the environmental piece, but the social construct and the role of the intermediaries [in both].

TXF: We’ve talked about ESG but in terms of also digitization of trade, central bank currencies, Libor transition, Basel III, the future of payments, all topics that came up in the Centenary conference, any highlights you’re particularly looking forward to?

TB: Everything that you mentioned is something that we have an active workstream on. So there’s no shortage of problems to solve! The issues around Libor and Basel III, prudential issues I look on as a core, steady state of things we need to do and focus on. Where the energy and the excitement will be in the next couple of years is clearly going to be around digitization, both in trade digitization as well as the future of payments and the role of digital currencies.

I reflect back on a lunch at SIBOS 2019 with some members of a central bank. I posed the question around digital currency and whether it was in the interest of central banks to really advance and being much more aggressive and assertive on the topic, as opposed to trying to stop the trend. At that time, there was a lot of pushback, scepticism, and a lot of uncertainty that digital currencies were in some cases being used for things that were not healthy for the overall financial system.

Two years on, we’re in a very different place. There are 60 or 70 different central banks around the world who have some projects to implement or advance digital currencies in their markets. That has the potential to fundamentally change how people transact. It has the potential to create a lot more inclusivity in markets where the underbanked are really challenged. It will also force banks to accelerate some of the innovations that they’ve been working on. So I am most excited in the next couple of years about the changes that will come from digitization in trade and flows.

BAFT’s virtual audience seemed to share some of Burwell’s enthusiasm for central bank currencies – asked whether they thought ‘do we need a central bank digital currency?’ Only 17% said ‘no’, nearly half (46%), said ‘maybe’ and fully 37% said a definitive ‘yes’. Watch this space.

Bobsguide: Cross-Border Interoperability will be a Key Test for CBDCs, BIS and BoE Specialists Warn

Via Bobsguide

Internationalisation of CBDC a Major Design Consideration

As the UK joins the list of global players considering issuing central bank digital currencies (CBDC), with the Bank of England taking practical steps to explore possible costs and benefits earlier this week, one crucial hurdle lies in the level of transnational utilisation they’d be able to guarantee, a Bank for International Settlements (BIS) advisor and a senior Bank of England specialist said.

One element of particular note concerns the possibility for non-residents to hold a country’s retail CBDC, said Ross Leckow, senior fintech advisor at the BIS Innovation Hub while speaking at BAFT’s annual global meeting.

“A particular design issue of importance for CBDCs is to what degree it would be internationalised, to what degree would the country issuing allow non-residents to hold it.”

Rachel Greener, senior CBDCs specialist at the BoE, added that another crucial ‘international’ design challenge of a CBDC is its potential use in cross-border payments.

“There is a lot of frictions involved in moving money across borders.”

Although the BoE has yet to make a decision on whether a sterling CBDC is necessary, interoperability with existing cross-border payments rails would be an “important topic for exploration”, Greener said.

“There are still opportunities to explore and there are still risks to understand.”

“Our view fundamentally is that payment system has to be grounded,” added Leckow. “Money is a public good, in which the public sector, particularly central banks, has to play the critical part in ensuring that it is safe, efficient, and usable.”

The remarks add to global regulators’ and central bankers’ examination of how CBDCs could be implemented and of their possible implications on financial stability – with practical questions ranging from how these new forms of money could affect the two-tier banking system to whether central banks currently have legal authority to issue them.

The BoE consultation similarly brought up the concern that CBDCs could become another internationally traded asset and could further expose domestic economies to international shocks.

According to the paper, “there may be a trade-off between the optimal provision of transaction services – that is, payments – and intermediation services – that is, credit. On the one hand, the introduction of new forms of digital money may improve the range of transaction services available to people. On the other hand, it might reduce the efficiency of credit provision in the economy.”

Stable Coins

The BoE paper also seeks further insight into private-sector stable coins – crypto currencies pegged to a fiat currency – outlining the need for these currencies to have the similar levels of trust that commercial bank money currently has. BAFT panellists agreed that stability is the key differentiator between stable coins and crypto assets (i.e. Bitcoin), which are extremely volatile and therefore represent an asset class that most regulators have discouraged investment in.

“The lack of price stability [in crypto-assets] is part of what has given rise to stable coins as a payment instrument,” said Dante Disparte, chief strategy officer at Circle.

“Part of the purpose of digitally-native payment instruments, whether it’s a CBDC or a stable coin, is to power an always-on, trusted form of payment that can live on the internet, reduce friction and reduce the type of opacity that we have with money transmission today.”

Though the US, the UK and the EU are considering regulation into stable coins, Disparts believes CBDCs and stable coins are part of a similar movement. He likens stable coins development to that of the Swift and other global payment networks.

“They have that property of being built in the line of sight of regulators and global interest, but really riding on private sector and free market innovations. The same holds true today with blockchain-based payment systems.

“A trusted digital currency, whether it’s privately issued or issued directly from a central bank, is only as good as the institutions [and] policies […] that guard it.”

Trade Finance Global: Global Market Overview at 2021 BAFT Global Annual Meeting

Via Trade Finance Global

The macroeconomic impact of the pandemic and its prolonged impact on certain sectors of trade was discussed at length in a panel moderated by Jake Jacobson at the BAFT’s 2021 virtual Global Annual Meeting.

Where is inflation headed?

There has been a buzz surrounding inflation and its short and long term movements.

With inflation being at an all-time high in certain countries, it should come as no surprise that this term is being explored at alarming rates.

Due to high levels of fiscal and monetary policies being deployed globally, consumer confidence indices are dropping, as markets are riddled with uncertainty and consumers become more conservative. However, is this worry warranted, and how does it impact trade?

During the pandemic as people were forced to stay home, businesses were forced to close and the government intervened, causing global GDP to plummet. Despite this taking place over a short period of time, economic recovery from these short term shocks will take much longer. Coupled with the underlying uncertainty surrounding the duration of future lockdowns limits the ability of economies to return to a pre-covid level of activity, resulting in an economy that is bound to struggle to bounce back quickly.

Household expectations

Having said that, the panel strongly believed that inflation and its increase or decrease is strongly dependent upon market perception. Therefore, expectations are key: if consumers believe that there will be an inflationary rise, then economies may enter a wage-cost cycle, which could easily get away from the control of central banks. Data being released later this week about household expectations in the US could shed some light on these expectations. Household expectations are particularly important as these are the ones that tend to stick, impacting inflation the most, and are the hardest to turn around. Other surveys conducted in the US, indicated that in a 5-10 year period, households do expect an inflationary rise. This was, in part, expected and hoped by the Fed, however, there is the possibility inflation will surge higher than the Fed anticipated.

Labour market expectations

As a result of government intervention with financial aid packets to supplement the economy during the pandemic, the labour market appeared to have rebounded faster than other markets. However, the data collected so far appears to be somewhat contradictory. As the schemes that allowed employees to be paid to stay home and access to extensive government benefits continue until the summer, a new question arises: how will the labour market be mobilised to go back to work when they have health concerns?

We are now forced to come to terms with the harsh reality that we will not know if this is transitory inflation or lasting inflation for at least the next six months.

Expectations for the post-COVID-19 recovery

What was expected to last only a few months, appears to be harder to shake off than expected. During the pandemic, markets, such as the semiconductor market, experienced supply shocks, which could now last until 2022.

Central banks are very keen to prevent markets from viewing this shift in inflation as one that will remain. This is crucial for global recovery, as global recovery seems to be intact and going, somewhat, according to expectations. The Fed and ECB are concerned about markets starting to price higher yields as this could hinder the recovery that is underway.

Recovery tends to be cyclical. East Asia, China and surrounding countries appear to have peaked in terms of recovery and may now begin to experience a slowdown in economic activity. Contrastingly, Europe, which has struggled to recover until this, is likely to see an improvement in the coming months. America continues to perform well due to their strong policies.

Despite appearing slow, the speed of recovery, when compared to the 2008 financial crisis, is quite promising. The swift and quick actions of governments all around the world in conjunction with the fast implementation of fiscal policies have resulted in a recovery that is likely to last and not fail or stagnate

The pandemic did not impact everyone equally

There were no winners or losers during the pandemic, but rather, put simply, there were people and businesses who were more technologically prepared and those who, unfortunately, were not. As a result, technology firms appear to have not only survived during this unprecedented time but thrived.

Their success and resilience cemented and accelerated the trend of digitisation. It became imperative to be able to not only utilise but also leverage technologies. This technology push was perceived by the panel as not only necessary but also a positive repercussion of the pandemic. Increasing the need for the implementation of technologies for survival in the post-COVID world will, inevitably, lead to innovation, and an increase in productivity.

The world post-COVID: resilience over efficiency

As previously mentioned digitisation is here to stay, particularly with giants, such as Amazon, thriving beyond any expectations leading to multiple businesses trying to copy their COVID-proof business model.

Furthermore, deglobalisation is on the rise. One of the clearest weaknesses the pandemic brought out in a large number of businesses was their fragility and susceptible supply chains. As a result, companies are now trying to make their supply chains more regional to boost their resilience. Depending on how this move performs in the coming months, will determine if the era of globalisation is truly over.

Mobility of people or, lack thereof, is another prominent point of the post-COVID world. Pre-pandemic, the mobility of people had been on a steady increase despite a dip in globalisation. As a result, the transportation sector was hit hard in 2020. This sector was one of the few sectors whose recovery was projected to be quick, however, it would appear the projection was wrong. This sector may be permanently damaged, the panel highlighted.

Despite the bleak expectations for the transportation sector, the services sector is expected to recover fairly quickly once services are allowed to operate again.

One interesting aspect of this new normal is that despite the certain degree of reluctance to return to working in the office, businesses were reluctant to enter business deals without personal interaction. Building trust is now, more than ever, at the heart of all businesses interactions and agreements in all sectors.

Furthermore, as the world came to a halt in 2020 the push for sustainability became immense. Consumers became even more concerned about climate change forcing companies to address the issue more vocally. As a result, prices for short flights, for instance, could rise as their environmental repercussions are now widely acknowledged. The great dilemma around energy-intensive industries: can clean energy meet up the demand? Or will we have to, in the interim period, go back to burning black coal? Will the inevitable increase in CO2 emissions in the interim period discourage consumers as CO2 emissions rise which could negatively impact an economy trying to get back up on its feet.

The unemployment gap is being addressed by the Fed, in the US, by stimulating the economy thus attempting to bring marginalised groups to the labour market. The labour market in the US, Europe, China and Japan, for example, have not entirely recovered. The conjunction of the pandemic with a constrained labour market makes this a challenging sector to recover in these countries. Labour markets in Indonesia, India and Vietnam, on the other hand, are thriving as they possess a growing population allowing the market to be easily supplemented.

How was trade impacted?

US-China tensions, the post-Brexit trading environment, and the global focus on Russia, all influenced the state of global pre-COVID trade. Now the global trading landscape has changed even more.

In the last global financial crisis when production tanked in the economy, there was an inevitable shift toward protectionism. Countries took up a “us vs them” mindset, with China, France and America publicly stating their positions. These countries wanted to keep as much of the stimulus they were pumping into the economy, inside the economy, where possible.

This is harder to achieve in a global economy such as the one of today, where supply chains inextricably nterlinked. Nevertheless, this is not the case in 2021, in fact, there is substantial growth than countries can handle. Countries have an excess of demand and no supply to meet it. The panel highlighted the predominant challenge of the second half of 2021 will be to find ways to meet the high demand.

To meet the demand for certain products, governments appear to be willing to provide subsidies and, consequently, buff up the resilience of national supply chains. Nevertheless, with technological developments, supply chains may experience an upgrade, making traditional supply chains obsolete to a certain degree.

All in all, the COVID-19 pandemic made the impossible possible, businesses closed down, people were asked to remain home and working from home became the new norm. Though the panel theorised what changes might take place in the post-COVID global market, uncertainty remains high and anything can happen.

Global Trade Review: Why BAFT Has Faster Cross-Border Payments in its Sights

Via Global Trade Review

The Bankers Association for Finance and Trade (Baft) has released a new whitepaper that provides recommendations and key considerations for the development of high-speed cross-border payments around the world.

Produced by Baft’s cross-border faster payments working group, which is made up of 24 members based in North America, Europe, the Middle East and North Africa and the Asia Pacific region, the paper, titled Enabling Faster Payments Across Borders, is the first step of Baft’s larger strategy to facilitate global faster payments by encouraging the designers of national and regional payments systems to include the capability at the outset.

“Baseline standards and processes must be established to address the open issues that make real progress on cross-border faster payments difficult to attain,” says Samantha Pelosi, senior vice-president for payments and innovation at Baft and co-chair of the working group. “These issues fall into three broad categories of interoperability, business processes and compliance, and are similar to the frictions that the Financial Stability Board (FSB) and Committee on Payments and Market Infrastructures (CPMI) have identified as inherent to all cross-border payments.”

Speeding up cross-border payments has long been an area of focus for the financial services industry. While Swift’s global payments innovation (gpi) service, launched in 2017, has increased the speed, transparency and tracking of cross-border payments through the Swift network, delays still come about when the final leg of the transaction needs to be cleared on the recipient country’s domestic payments system.

“To benefit international trade and economic growth, we need to enhance global connectivity by making payment systems in different geographies interoperable,” says Vinayak Prabhu, vice-president of global transaction banking at Mashreq Bank and co-chair of the working group. “The paper provides recommendations along with potential models for building a seamless, transparent, and faster cross-border payments ecosystem.”

Speaking to GTR, Pelosi outlines Baft’s work in this area, and explains why the association is currently encouraging entities that are currently building or upgrading their domestic faster payments systems to incorporate the functionality and operating rules necessary for processing cross-border payments.

GTR: What is driving Baft’s work on cross-border faster payments, and why now?

Pelosi: Over the last couple of years, we have been interfacing on behalf of our members with the developers of national and regional faster payments systems, such as the Federal Reserve System in the US and Buna in the Middle East, in standing up new platforms. In fact, many countries have work underway to modernise their entire national payments system and the core of these efforts is often faster payments. Baft’s objective is to ensure that the basic requirements for processing cross-border transactions are incorporated in the design of national and regional faster payment systems in order to create a global faster payments ecosystem.

GTR: Is this work a precursor to a set of standards or rulebook for faster payments systems around the world?

Pelosi: We are currently looking at the functionality and rulebooks of different existing domestic and regional cross-border systems, such as the EU’s Sepa Instant, the Nordic countries’ P27, and the Arab Monetary Fund’s Buna system. We are comparing these features and considering the best in class, so that we can hold them up as an example of best practice. Our next step will be to go out to operators and infrastructure providers, and encourage them to build this functionality in at the outset instead of having to retrofit it in the backend. So, we’re not necessarily looking to put together specific standards, but rather identifying the key underlying considerations and requirements.

GTR: According to the whitepaper, over 50% of payments are already completed with 30 minutes through Swift and correspondent banking. What gains therefore are there to be made by further speeding up the cross-border payments system?

Pelosi: By analysing its gpi payments, Swift has observed that a lot of cross-border correspondent banking transactions take place within 30 minutes. When speaking of cross-border faster payments, we are not seeking instant delivery – a couple of hours to reach the beneficiary might suffice. However, there are still significant barriers to faster payments, and we are certainly a long way from having 100% straight-through processing. There is still a lot of ground that can be covered, and I think that if some of these issues identified in the paper are tackled, the industry can attain a more efficient, more cost-effective global payments system.

GTR: A large section of the whitepaper is given over to looking at the state of readiness for cross-border faster payments around the world. What’s your assessment? Do bottlenecks still remain?

Pelosi: I do think that we will collectively need to take baby steps in achieving a cross-border faster payments ecosystem. Certain institutions are more ready than others to move cross-border. The UK rolled out its domestic faster payments system almost 15 years ago. Because of Brexit, all payments traveling outside the country are now considered international and UK banks may be looking for a faster method of delivery. Meanwhile, in the US, The Clearing House’s real-time payments network has been active for five years and the Federal Reserve System’s FedNow platform will launch in 2023. Therefore, US banks are likely focused on their capability to deliver domestic, rather than cross-border, payments. Readiness really differs from country to country and from region to region.

GTR: This work has come out of Baft’s Global Payments Industry Council (GPIC), which was launched last year as part of Baft’s new payments strategy. What other issues is the GPIC working on?

Pelosi: The GPIC has three different work streams underway. Cross-border faster payments is one of them and we intend to engage in some advocacy later on. Another workstream is around ISO20022, which is about standardising the use of the standard globally, with a particular focus on payment purpose codes. Another area we are looking into is making sure there is a level playing field for our bank and non-bank members in payments with respect to anti-money laundering (AML) requirements. Our aim is to tackle all of this low-hanging fruit along the most voluminous corridors for cross-border payment flows.

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