《OMFIF:未来支付2022(英文版)(30页).pdf》由会员分享,可在线阅读,更多相关《OMFIF:未来支付2022(英文版)(30页).pdf(30页珍藏版)》请在三个皮匠报告上搜索。
1、1omfif.orgTURNING THE CROSS-BORDER PAYMENTS ROADMAP INTO REALITYomfif.org/dmiDMI Future of Payments 2022 23 2022 OMFIF Limited.All Rights Reserved.Strictly no photocopying is permitted.It is illegal to reproduce,store in a central retrieval system or transmit,electronically or otherwise,any of the c
2、ontent of this publication without the prior consent of the publisher.While every care is taken to provide accurate information,the publisher cannot accept liability for any errors or omissions.No responsibility will be accepted for any loss occurred by any individual due to acting or not acting as
3、a result of any content in this publication.On any specific matter reference should be made to an appropriate adviser.Company Number:7032533.ISSN:2398-4236Official Monetary and Financial Institutions Forum 181 Queen Victoria St,London EC4V 4EG,United Kingdom T:+44(0)20 700 27898 enquiriesomfif.org o
4、mfif.orgABOUT OMFIFWith a presence in London,Washington and New York,OMFIF is an independent forum for central banking,economic policy and public investment a neutral platform for best practice in worldwide public-private sector exchanges.ACKNOWLEDGMENTSOMFIF thanks officials from the co-operating c
5、ountries and cities for this publication,which will be joining us in launch partnerships around the world.We are grateful to many other associates and colleagues for their assistance and guidance.AUTHORSLewis McLellanEditor,Digital Monetary InstituteTaylor PearceEconomistJulian JacobsEconomistSimon
6、BradyKaterina Liu Research Assistant ADDITIONAL RESEARCHNikhil Sanghani Managing Director,ResearchEDITORIAL AND PRODUCTION Simon HadleyDirector,ProductionFergus McKeownSubeditorWilliam Coningsby-Brown Production ManagerSarah MoloneySubeditorMARKETINGJames FitzgeraldDeputy Head of Events and Marketin
7、g Henna RattuMarketing and Events Coordinator Maya TurnbullEvents and Marketing CoordinatorDMI TEAMPhilip MiddletonChairman,DMIKatie-Ann WilsonManaging Director,DMIFolusho OlutosinCommercial Director,DMISinan YilmazAccount and Content Manager,DMIMax SteadmanProgrammes Manager,DMIDavid ColemanCommerc
8、ial Assistant,DMILead report sponsorLead chapter sponsorsCo-sponsorsREPORT SPONSORS4Foreword Dynamism in payments but cross-border developments lagging5Foreword Enabling inclusive economies through the frictionless flow of value6CBDC Survey 2022CBDCs sooner rather than later,say central banks14Chapt
9、er 1 Turning the cross-border payments roadmap into reality062Chapter 2 Cryptos crucial appeal for emerging markets30Chapter 3 Promise and peril of central bank digital currencies40Chapter 4 Central banks must take the lead in payments cybersecurity48Chapter 5 The metaverse:a model for di
10、gital payments?omfif.org/dmi45DMI Future of Payments 2022 There has rarely been such a dynamic and innovative time for the payments industry.The advent of novel technologies has galvanised efforts to improve the speed and security of payments,as well as to bring down costs and broaden access to fina
11、ncial services.Progress in domestic payments has been rapid,with cheap and quick digital payments solutions already available,including in emerging markets where mobile payments have gained traction.Progress in cross-border payments has been less impressive,however,and problems weigh heavier in emer
12、ging markets,with higher costs disproportionately falling on those least able to bear them.The problems of connecting different domestic payments environments,many of which have widely varying architecture,are incredibly complex and there are many solutions being explored.The Committee on Payments a
13、nd Market Infrastructures has done an excellent job in defining the problems and laying out responses.Traditional players are making important improvements to their services,improving speed and security with new frameworks,but there are still major obstacles that are yet to be surmounted including d
14、ata localisation.Outside of the traditional payments space,we examine the efforts of innovators to develop a new payments infrastructure that can sidestep some of the challenges facing the established industry.This is unlikely to be a winner-takes-all kind of fight.The variety of payments systems wi
15、ll grow,creating competition and diversity in the marketplace.As part of this work,we are delighted to introduce our first survey on central bank attitudes and intentions regarding central bank digital currency.Our survey shows that improving cross-border payments is not the primary goal central ban
16、ks are pursuing with their development of CBDCs.Nevertheless,many survey respondents said that they saw promise in the interlinking of domestic CBDCs as a means of improving cross-border payments.We examine what promise CBDCs hold for emerging markets,where development is taking place most rapidly,a
17、s well as looking at the value cryptocurrencies and stablecoins offer to jurisdictions with unstable and unreliable currencies.While they offer valuable havens from inflation and,in some cases,cheap remittance channels,the absence of robust know-your-customer procedures and tools to prevent financia
18、l crime could limit their potential.As these systems become more important,the technological expertise central banks require grows.Our survey shows that cybersecurity is the top concern for central banks examining digital currency.We explore the threats they face and the policies they can employ,par
19、ticularly in emerging markets,to mitigate them.Finally,we examine the development of the metaverse and discuss what payments solutions might be needed to serve the emerging use cases that a new digital environment will necessitate.It is possible that by developing the infrastructure to support payme
20、nts in globally accessible digital environments,we might end up with a solution that can help solve some of the problems in cross-border payments.The payments industry is undergoing seismic changes.Both the established players and new entrants have work to do before they are able to address the chal
21、lenges of cross-border payments,but the systems we use to send value to counterparties in other countries will change substantially over the next few years.FOREWORDDYNAMISM IN PAYMENTS BUT CROSS-BORDER DEVELOPMENTS LAGGINGNew entrants and existing players are working hard to reimagine how payments w
22、ork,writes Katie-Ann Wilson,managing director,Digital Monetary Institute.THE PROBLEMS OF CONNECTING DIFFERENT DOMESTIC PAYMENTS ENVIRONMENTS,MANY OF WHICH HAVE WIDELY VARYING ARCHITECTURE,ARE INCREDIBLY COMPLEX AND THERE IS A VARIETY OF SOLUTIONS BEING EXPLORED.SINCE THE LAST edition of Future of pa
23、yments,the world has continued to undergo significant change.Digitalisation has continued at pace as we emerge from the worst pandemic in 100 years,while geopolitical shifts,rising energy costs and inflation are all impacting people everywhere.At the same time,the financial ecosystem continues to ev
24、olve with new entrants,new technologies and innovative solutions,and customer expectations are higher than theyve ever been.These external factors are having a knock-on effect on the payments industry and contributing to increasing fragmentation.Enabling inclusive digital economies is therefore more
25、 important than ever.Without fast,frictionless flows of value,inequality will only increase.But for money to flow smoothly and quickly across borders,interconnectivity is critical.Swift,and our community of more than 11,500 organisations in over 200 countries and territories,continues as it always h
26、as to be a symbol of global co-operation,finding opportunities to bring us all together.Our strategy for achieving instant and frictionless cross-border payments is closely aligned to the priorities of the G20 for an enhanced cross-border payments experience.Improvements to speed,transparency,cost a
27、nd access will be critical if we,as an industry,are to succeed in this mission.While the last few years have seen excellent progress for wholesale cross-border payments,the same focus also needs to be applied to the small business and consumer space,which is among the fastest growing segments in the
28、 cross-border payments industry.Individuals and small-and medium-sized enterprises that want to send money internationally face a time consuming,costly and uncertain process.If we dont fix that,well only be contributing to more fragmentation.Access,as well,to the solutions that enable the rapid flow
29、 of value across borders must increase.Thankfully,while technology has played its part in fragmentation,it also brings us great opportunities.Cloud-based services and the rise of application progamming interface technology mean that the financial industry can offer its services to more people and bu
30、sinesses in more places.If we are to overcome fragmentation and achieve our collective goal,we must come together as a financial community and harness our collective strengths.Standardisation,led by the industrys adoption of ISO 20022,which begins next year,will be critical to achieving interoperabi
31、lity between systems and infrastructures.Swift has championed responsible innovation for the future of payments,with experiments this year demonstrating that we can use the power of central bank digital currencies across borders,regardless of the underlying distributed ledger technology,and integrat
32、e them seamlessly with the ecosystems of today.Collaboration and partnership will be essential in achieving frictionless cross-border payments.We are delighted to support OMFIFs Future of payments report,which provides valuable thought-leadership in support of making the payments industry more effic
33、ient,accessible and inclusive.FOREWORDENABLING INCLUSIVE ECONOMIES THROUGH THE FRICTIONLESS FLOW OF VALUENew technologies risk fragmenting the payments landscape even more,but they also hold the promise of bringing it together,writes Thierry Chilosi,chief strategy officer,Swift.WHILE THE LAST FEW YE
34、ARS HAVE SEEN EXCELLENT PROGRESS FOR WHOLESALE CROSS-BORDER PAYMENTS,THE SAME FOCUS ALSO NEEDS TO BE APPLIED TO THE SMALL BUSINESS AND CONSUMER SPACE omfif.org/dmiDMI Future of Payments 202267CBDCs SOONER RATHER THAN LATER,SAY CENTRAL BANKSIN this years Future of payments report,we conducted a surve
35、y of central banks to uncover their aims and objectives for CBDCs,plans for implementation,availability of internal resources and views on technology to improve cross-border payments.CENTRAL BANK DIGITAL CURRENCIES ARE GAINING MOMENTUM Several central banks have launched CBDCs,either as pilots or as
36、 fully deployed systems.Many of their peers have been encouraged by the progress.The Atlantic Council reported that 105 countries are now exploring a CBDC,up from only 35 countries in May 2020.Responses to our survey reflected that trend.Among survey participants,two-thirds reported that they expect
37、 to issue a CBDC within 10 years,while none expected to issue one in more than 10 years(Figure 1)Overall,if central banks decide to issue a CBDC,they expect deployment to come sooner rather than later.Among the central banks that said they do not expect to issue a CBDC,many are actively researching
38、the possibility of launching one.One central bank survey respondent commented that they monitor the possible motivations and problems a CBDC can solve to see when will be convenient or necessary to prioritise efforts on this topic,while another stated that their current stance on the issuance of a l
39、ocal CBDC may change should domestic or international factors justifying such a change emerge.Many central banks surveyed have been encouraged by their peers CBDC developments.Compared to a year ago,none of the survey participants are less inclined to issue a CBDC(Figure 2).Instead,their stances hav
40、e either remained the same(62.5%)or they are now more inclined to issue a CBDC(37.5%).One survey participant more inclined to issue a CBDC explained that central banks around the world have accelerated their CBDC research and experiments,with more and more practical examples of positive experiences.
41、The presence of dedicated CBDC employees in central banks is indicative of their monitoring and research activities.The central banks surveyed including those who state that they do not intend to issue a CBDC have a median of five employees dedicated to researching or developing CBDCs in some capaci
42、ty.Many also involve employees in CBDC projects on a part-time basis and include team members from various departments.CENTRAL BANKS AROUND THE WORLD HAVE ACCELERATED THEIR CBDC RESEARCH AND EXPERIMENTS,WITH MORE AND MORE PRACTICAL EXAMPLES OF POSITIVE EXPERIENCES Source:OMFIF Future of payments sur
43、vey 2022 Source:OMFIF Future of payments survey 202224122935Within 1-2 yearsWithin 3-5 yearsWithin 6-10 years10+yearsWe do not expect to issue a digital currency0070NoYes,we are now more inclined to issue a CBDCYes,we are now less inclined to issue a CBDC1:Two-thirds of central banks expe
44、ct to issue a CBDC within 10 yearsWhen do you expect to issue a Central Bank Digital Currency?Share of respondents,%2:Central banks are not discouraged by CBDC developments Has your thinking on digital currencies changed in the past year?Share of respondents,%1.Two-thirds of central banks surveyed e
45、xpect to issue a CBDC within 10 years.2.Central banks are pursuing CBDC for various reasons,but none cited improving cross-border payments as the main motivation.3.Nevertheless,many thought that inter-linking CBDCs offers a promising avenue for improving cross-border payments.4.Banks will not have t
46、he exclusive right to distribute CBDC.Instead,they will be joined by new,regulated players.5.Avoiding low adoption of CBDCs is a primary concern for central banks,while bank disintermediation is a secondary concern.CENTRAL BANK DIGITAL CURRENCIES SURVEYCENTRAL BANK DIGITAL CURRENCIES SURVEYCENTRAL B
47、ANK DIGITAL CURRENCIES SURVEYBy Katerina Liu omfif.org/dmiDMI Future of Payments 202289NO CONSENSUS ON THE PURPOSE OF CBDC,BUT CROSS-BORDER PAYMENTS NOT A MAIN FACTORIn this years survey,there is a wide spread of central banks objectives for pursuing a CBDC,though there is no strong trends towards a
48、ny one objective(Figure 3).Surprisingly,no central bank listed improving cross-border payments as their main objective for pursuing a CBDC.Instead,preserving the central banks role in money provision was the second most reported main objective.Other encompassed a range of alternative objectives:digi
49、talisation,improving the resiliency and efficiency of payments systems and interoperability.Some 75%of participants that responded with other said they had multiple objectives,adding that they believe these flow into each other,with one survey participant explaining that they do not necessarily see
50、one compelling motivation,rather a number of them.INTERLINKING CBDCS A PROMISING AVENUE FOR CROSS-BORDER PAYMENTSAlthough no central bank said it was their main motivation for pursuing a CBDC,many said that interlinking CBDC systems was the most promising option for improving cross-border payments.I
51、mproving cross-border payments is a major priority for the Bank for International Settlements and the G20,underpinning the committee on payments and market infrastructures programme on enhancing cross-border payments.A survey respondent commented that CBDCs may provide a building block for better cr
52、oss-border payments in the future,while another stated that the possible issuance of a foreign CBDC that could be available on a cross-border basis would encourage their central bank to pursue a CBDC.The debate around CBDCs and cross-border payments is still unsettled.A survey respondent pointed out
53、 that there are a lot of factors involved in 3:No strong consensus of central banks objectives for pursuing a CBDCWhat is your main objective by pursuing a CBDC?Share of respondents,%Source:OMFIF Future of payments survey 20224:Interlinking CBDCs shows most promise for cross-border payments What do
54、you think is the most promising avenue to improve cross-border payments?Share of respondents,%Source:OMFIF Future of Payments survey 20220510152025CybersecurityLow adoptionBankdisintermediationNeed for newinfrastructureDecline of cashusageOther00708090100An opportunity tomake cross-border
55、payments moreefficientA risk to financialstability because ofpoor quality standardsA risk to financialstability because ofdollarisationAn opportunity tomake domesticpayments moreefficientOther055404550OtherPreserve the central banks role in money provisionBoost financialinclusionImproving
56、 thetransmissionmechanism ofmonetary policyAid cross-borderpaymentsWe are notpursuing a CBDC055Interlinking CBDCsInterlinking real-timegross settlementsystemsGlobal stablecoinsHarmonising formatslike ISO 20022Other5:Stablecoins also show some promise for cross-border payments,but remain a
57、 riskRespondents which view stablecoins as:Share of respondents,%Source:OMFIF Future of payments survey 20226:Low adoption and cybersecurity tie as primary concerns over deploying a CBDC What is your main concern over deploying a CBDC?Share of respondents,%Source:OMFIF Future of payments survey 2022
58、cross-border payments.To improve these payments in terms of timing,speed,fees and compliance costs,there must be a comprehensive view and harmonised approach.These include aspects such as technical,operational,legal and possibly political.Simply launching a CBDC is unlikely to solve many of the chal
59、lenges that cross-border payments face.Stablecoins may be another solution for cross-border payments.Yet,only 13%of respondents indicated that stablecoins would be the best avenue to improve cross-border payments(Figure 4).Despite that,88%of survey respondents viewed stablecoins as a possible opport
60、unity for cross-border payments,but 75%also believed they pose a risk to financial stability because of poor standards(Figure 5).Stablecoins may become a viable option for cross-border payments if the regulatory environment is conducive,as explained by a participant who stated that global stablecoin
61、s will dramatically improve cross-border payments assuming no adverse regulatory environment.LOW ADOPTION A PRIMARY CONCERN,BUT THE RIGHT TOOLS MIGHT OFFSET THATCentral banks are particularly concerned about the risk of building a CBDC that ends up not being used.This is of particular concern for th
62、ose central banks that see boosting financial inclusion as a key reason for launching CBDC.One survey participant stated that low adoption would lead to significant reputational damage,but there are adequate tools to ensure its usage.Many survey respondents stated that their respective institutions
63、had not yet made any official decisions to drive adoption but are developing strategies.Several participants suggested that offline functionality is crucial,ensuring that CBDC can operate in areas without widespread internet access.Other suggested measures include mandatory distribution,interoperabi
64、lity,user-friendly wallets and direct incentives such as discounts for consumers.Some of these measures have been omfif.org/dmiDMI Future of Payments 20221011Developing economies,particularly those in the Caribbean,have been at the forefront of testing and launching central bank digital currencies.B
65、AHAMAS March 2019:Selected NZIA as the preferred solutions provider and announced its pilot programme:Project Sand DollarMay 2019:Signed partnership contract with NZIA.November 2019:Special session of the National Payments Council was convened to confirm the approach to the central bank digital curr
66、ency project.Summer 2019:The central bank conducted a targeted baseline survey on financial inclusion and access for Exuma.27 December 2019:Began Project Sand Dollar pilot in Exuma.28 February 2020:Pilot expanded was to the Abaco islands.October 2020:National rollout of Project Sand Dollar to the re
67、st of the Bahamas.July 2022:Value of Sand Dollars in circulation reached 300,000 Bahamian dollars,with 30,000 individuals who have mobile wallets and 845 merchants who accept it.NIGERIAJuly 2021:Design phase of CBDC project30 August 2021:Announced a partnership with Bitt and issued preliminary guide
68、lines for Project eNaira.28 September 2021:The eNaira website goes live.25 October 2021:eNaira launched.December 2021:600,000 eNaira wallets had been created and more than 35,000 transactions had taken place.25 August 2022:The Central Bank of Nigeria releases the option to create an eNaira wallet wi
69、th unstructured supplementary service data,where users dial a four-digit code on their mobile phones.EASTERN CARIBBEAN CENTRAL BANK (eastern Caribbean states)2019:Began development of digital currency.12 February 2021:First DCash transaction was successfully carried out.31 March 2021:Launched DCash
70、in Antigua and Barbuda,Grenada,Saint Kitts and Nevis,and Saint Lucia,becoming the first currency union central bank to issue digital cash.30 July 2021:DCash was launched in Saint Vincent and the Grenadines.7 December 2021:DCash went live in Dominica and Montserrat.14 Jan 2022:DCash temporarily went
71、offline due to a technical issue where customers could not transact using the wallet.7 March 2022:DCash resumed service with an enhanced security design for the system.29 June 2022:DCash was launched in Anguilla,its final member stateJAMAICA17 July 2020:The Bank of Jamaica issued its formal invitati
72、on to CBDC providers to join its Fintech Regulatory SandboMay 2021:The BoJ started working with eCurrency Mint on regulatory sandbox project 9 August 2021:The BoJ minted 230m Jamaican dollars worth of digital currency.December 2021:In partnership with the National Commercial Bank,the BoJ 57 customer
73、s were on onboarded in the pilot.31 December 2021:The BoJ announced the successful completion of the pilot.February 2022:The BoJ announced name for CBDC,Jamaican Digital Exchange(JAM-DEX).11 July 2022:JAM-DEX launched on the Lynk digital wallet.Source:xxxx0070KYC capacityTechnical develop
74、ment ofdigital currenciesMarketing and promotion ofdigital currenciesOther00708090TechnologyprovidersCommercialbanksAcademicsAdvisoryservices to helpwith strategyLegal servicesMarketing andpromotionprovidersOtherCurrently working withIntending to work with7:There is almost an even spread
75、showing central banks need for third-party services What services do you need private sector third-parties for?Share of respondents,%Source:OMFIF Future of Payments survey 20228:Central banks are working with the full range of third-party servicesWhich of the following third-parties are you currentl
76、y working with/intend to work with on digital currencies?Share of respondents,%Source:OMFIF Future of Payments survey 2022THE FIRST CBDCs IN DEPLOYMENTTHE FIRST CBDCs IN DEPLOYMENTTHE FIRST CBDCs IN DEPLOYMENTemployed by Nigeria(the Central Bank of Nigeria did not complete the survey)to boost usage
77、of the eNaira,its CBDC.In August 2022,the CBN unveiled the use of unstructured supplementary service data short codes,which enable users without internet connection or bank accounts to set up an eNaira wallet using a non-smartphone.In October 2022,the CBN offered a 5%discount to drivers and passenge
78、rs of motorised rickshaws who use the eNaira.While it is too soon to determine if these measures will improve adoption,it might take more time before the eNairas adoption rates increase,but the CBN is still optimistic it is working with third-parties to innovate even more solutions.One important met
79、hod of driving adoption is to employ CBDC for government payments.Delivering pensions and benefits and taking taxes and other payments in CBDC is likely to ensure a high adoption rate.Other central banks focused on cybersecurity as their main concern,which may indicate a need for third-party cyber-s
80、ecurity consultation services.Bank disintermediation is a smaller concern.Only 17%of survey respondents said they were worried that CBDC issuance would compromise banks business models or funding habits.In a separate survey on commercial banks thoughts on CBDCs,one respondent explained that they do
81、not believe it would be in the interest of central banks to disintermediate commercial banks.Rather,commercial banks expect to work alongside central banks for their CBDC projects all respondents in the commercial bank survey indicated that they expect to be involved with central banks as a wallet p
82、rovider,for credit creation and know-your-customer compliance.BANKS WILL NOT HAVE EXCLUSIVE POWER TO DISTRIBUTE CBDCWhile it is widely expected that central banks will work with commercial banks on CBDC,almost all surveyed central banks intend for their CBDC to be distributed by a range of new regul
83、ated private sector providers as well as banks.Furthermore,survey participants reported the need for all private sector third-parties enquired about,including for the technical development of digital currencies,marketing,promotion of digital currencies,and KYC capacity(Figure 7).Central banks are cl
84、early not working alone(Figure 8).Central banks,including 33%of the share of those who do not expect to issue a digital currency,are working with a range of third-party services.Central banks research and exploratory phases account for most of the involvement of these services.Survey respondents are
85、 working with technology providers(71%),academics(47%)and strategy advisory services(47%)in this phase.The low concern with bank disintermediation is highlighted here too,with 47%of respondents working with commercial banks and 71%intending to work with them in the future.Looking to future involveme
86、nt,88%and 71%of respondents intend to work with technology providers and commercial banks respectively(Figure 8),reinforcing commercial banks beliefs that bank disintermediation will not be an issue.While few central banks are working with marketing and promotion providers right now(6%),many intend
87、to work with them in the future(47%),indicating that respondents are taking steps to pre-empt low adoption as they move on to the pilot and launch phases of their CBDCs.omfif.org/dmiDMI Future of Payments 20221213IN TODAYS digital economy,transactions must be instant and frictionless whenever and wh
88、erever they need to go.Thats no small feat when money starts moving across borders,especially when considering the myriad factors that must be taken into account,from navigating different time zones,processing approaches and domestic payments systems,to understanding compliance requirements in numer
89、ous jurisdictions.Increasingly,theres a need to consider possible new forms of value too from central bank digital currencies to tokenised assets.Swift sits at the heart of the cross-border payments ecosystem,ensuring payments reach their destinations quickly,securely and compliantly.Through our net
90、work of more than 11,500 institutions in over 200 countries and territories,money can be sent anywhere in the world even to the most remote locations.And our commitment to responsible innovation means every day the experience gets faster and better while maintaining the highest levels of security,re
91、siliency and reliability.Weve made strong progress over the past two years with a strategic focus on enabling instant and frictionless processing between 4bn accounts worldwide,aligned with the G20s objectives of improving speed,cost,transparency,choice and access in the cross-border payments experi
92、ence.Swifts achievements include:Speed:Most payments over Swift today use gpi and nearly half reach their end beneficiaries within five minutes and two-thirds arrive within one hour,well on the way to achieving the G20 goal of having 75%of international payments settling within 60 minutes by 2027.Co
93、rrespondent banking has been delivering secure,compliant cross-border payments and banks uses intermediaries to access the required currency within a specific jurisdiction.There has been a steady decline in the number of correspondent banks involved in a payment today,73.9%of all cross-border transa
94、ctions involve just one or no intermediary.Transparency:By embedding a unique tracking code in every transaction,Swift has enabled banks to have complete visibility on the status and costs of transactions with real-time tracking all along the process just like tracking a parcel delivery.This has pro
95、vided unprecedented insight into the frictions that slow down payments.We know from this data,for instance,that the biggest impact on speed comes from capital controls and domestic regulatory requirements.For banks in countries with capital controls,the time taken by the beneficiary side is nearly t
96、hree times that for banks in countries without them.This issue has been recognised by the Committee on Payments and Market Infrastructures as part of its focus on an efficient legal,regulatory and supervisory environment for cross-border payments.Costs:One of the other frictions is incorrect benefic
97、iary information-such as typos and transposed account numbers-that breaks automated processing and requires manual intervention to resolve.Swift has introduced an application programming interface-based pre-validation service,which allows sending banks to verify beneficiary data upfront,before execu
98、ting the transaction.For banks not ready for pre-validation,Swift provides a pre-check of the account details against pseudonymised and aggregated data from more than 4bn accounts to catch errors before a payment is sent.Its deployment,which could save the industry millions each year,currently cover
99、s 70%of beneficiary accounts in major markets.DRIVING INTEROPERABILITY IN CROSS-BORDER PAYMENTSNew technology brings with it new challenges,such as integrating legacy systems with novel ones.Swift is making this possible though,writes Saskia Devolder,strategic programme director,cross-border payment
100、s,SwiftFOR BANKS IN COUNTRIES WITH CAPITAL CONTROLS,THE TIME TAKEN BY THE BENEFICIARY SIDE IS NEARLY THREE TIMES THAT FOR BANKS IN COUNTRIES WITHOUT THEMChoice:Swift has not only focused on bringing these benefits to high value wholesale payments,its also improved the experience for small businesses
101、 and consumers who send low-value payments around the world.Through Swift Go,we have established a new standard for payments under$10,000,bringing new levels of speed,transparency and certainty for account to account transfers.In 2022,signups for the service tripled to more than 500 banks across mor
102、e than 120 countries.The pandemic kick-started digitalisation.And with new technology and shifts in the geopolitical landscape emerging,market players continue to rush to develop new solutions to enhance cross-border payments,with a focus on front-end solutions.Central banks,too,are exploring digita
103、l currencies to pursue the G20s goals but are largely focusing on domestic use.Taken together,these factors are increasing fragmentation.Without a focus on back-office evolution,we risk the emergence of digital islands:solutions that operate in silos and which are not compliant or interoperable with
104、 each other.With digital currencies,stablecoins and other digital assets set to enter the market at scale,we need to guarantee interoperability with existing systems that consumers and businesses rely on and that have proven their value to the economic system.Swift has always focused on interoperabi
105、lity.It is central to instant and frictionless payments.The importance of standardisation,too,has recently been recognised by the G20 in its reprioritised programme for cross-border payments enhancements,particularly the importance of ISO 20022.This new international standard can carry much more inf
106、ormation than older solutions,but that data is also more structured,ensuring the efficient execution of compliance requirements for cross-border payments.Swifts new transaction management platform,set to roll-out in 2023,enables interoperability between ISO 20022 messaging and legacy messaging,thank
107、s to an integral in-flow translation service.The platform provides new orchestration capabilities,providing banks with richer,better structured data to make use of new API-based technology for an enhanced payment execution experience.Every bank in the chain will have access to all required data for
108、compliance requirements.Other API-based tools,such as pre-validation,help remove friction while gpi instant allows an anchor bank to provide access to the domestic instant payments system in the destination market giving fast settlement and the immediate posting of the funds to the beneficiary accou
109、nt.Swift continues to closely monitor new payments methods,settlement mechanisms and currency types,including CBDCs.Our collaborative experiments early this year successfully demonstrated interoperability between CBDCs built on different distributed ledger technologies,and between these and fiat cur
110、rency.This solution is now being tested further with 18 central and commercial banks.This experiment forms part of our robust innovation agenda in support of our strategic goals.It is through experiments such as these that we will achieve interoperability in cross-border payments and enable customer
111、s of all types to make instant and frictionless transactions at any time,anywhere and for any purpose.THE IMPORTANCE OF STANDARDISATION,TOO,HAS RECENTLY BEEN RECOGNISED BY THE G20 IN ITS REPRIORITISED PROGRAMME FOR CROSS-BORDER PAYMENTS ENHANCEMENTS,PARTICULARLY THE IMPORTANCE OF ISO 20022 omfif.org
112、/dmi15DMI Future of Payments 2022 1415TURNING THE CROSS-BORDER PAYMENTS ROADMAP INTO REALITYProgress has been made on interoperability and regulatory frameworks,but bottlenecks remain on data localisation.By Taylor Pearce CROSS-BORDER payments are the forgotten corner of the worlds financial plumbin
113、g.This bleak characterisation came in a 2020 stocktaking exercise conducted by the Bank for International Settlements Innovation Hub,International Monetary Fund and World Bank.While significant progress has been made within domestic markets within which payments have become markedly faster,cheaper a
114、nd more intuitive sending payments abroad has developed much more slowly.Despite the manifold benefits of improving multilateral platforms,cross-border payments remain comparatively slow,costly and less transparent.BENEFITS OF ENHANCED CROSS-BORDER PAYMENTS For both correspondent institutions and en
115、d users,there are myriad potential benefits of enhancing cross-border payments.The turnaround on cross-border payments conducted through traditional bank transfers can take up to five days,compared to the nearly instant service offered domestically.Bank account balances can only be updated during th
116、e hours when the underlying settlement systems are open.In most jurisdictions,these systems are aligned to normal business hours,which can cause delays in clearance and settlement.As 1.The reception of the G20 Roadmap for Enhancing Cross Border Payments has been positive.Regulators and private secto
117、r stakeholders are largely aligned.2.Both technological and regulatory progress is being made to enhance fiat-based cross-border payments in areas such as interoperability and regulatory harmonisation.3.The challenge of facilitating cross-border data exchange presents a significant hurdle,underminin
118、g the potential for a fully centralised cross-border payments system with a global reach.4.Regionally integrated payment networks offer an exciting prospect.noted by the Committee on Payments and Market Infrastructures roadmap,mismatched operating hours of payments infrastructures can lead to higher
119、 liquidity costs and settlement risk for banks and financial intermediaries and to delays for payment recipients.Moreover,in legacy systems,banks initiating cross-border payments rely on accounts in other banks(known as correspondent banks)in other jurisdictions to move money across borders and make
120、 payments on their clients behalf.This is not only slow,but expensive fees compound as multiple intermediaries in the payment chain charge a fee.This can drive up costs even without factoring in foreign exchange spreads,which can themselves vary widely based on the users access to the best liquidity
121、 providers.The frictions in cross-border payments systems are especially costly for developing countries.World Bank and IMF data indicate that the value of personal remittances received reached$661bn in 2019 and is still rising.A 2022 report on digital remittances published by the Visa Economic Empo
122、werment Institute estimated that the average cost of remittances at approximately 6%of the total sent(in line with the World Banks estimate),with the average cost of cash-funded remittances averaging slightly higher at 6.5%.While the same report found that a higher share of remittances is digitally
123、initiated than ever before,this number still only reflects about a third(34%)of remittance flows.Given that cash-initiated remittances remain the most expensive way for migrant workers to send money to their home countries,it is imperative to improve and expand digital remittance services.Hence,the
124、data reveals that facilitating better cross-border payments will bring down the cost and processing time of international transactions.For developing countries which receive a substantial proportion of their gross domestic product via remittance flows,improving payments infrastructure is even more i
125、mportant.PROPOSED SOLUTIONS:CPMI ROADMAP To understand the difficulties of enhancing cross-border payments systems,it is important to note the difference between a domestic payment and cross-border payment.Saskia Devolder,strategic programme director,cross-border payments at Swift,noted a few key fa
126、ctors which differentiate cross-border payments from their domestic counterparts:the need for foreign exchange and the need for compliance requirements,including sanctions screening according to the regulation in the destination country.For Devolder,although technological innovations can offer some
127、improvements related to the speed and complexity of both foreign exchange and compliance,there is no magic bullet to solving these issues.Correspondingly,while many players are trying to innovate their way around these challenges,to think that this is about shaving off idiosyncratic differences betw
128、een systems is wrong,noted one OMFIF interviewee from the payments industry.As those operating in the cross-border payments space are discovering,the differences between domestic payments infrastructures are nontrivial and the challenges facing legacy systems are not always able to be solved by tech
129、nological innovation:Different countries have developed payments systems in various social,political and historical contexts,and the inputs they require are genuinely different,as noted by the interviewee.Therefore,the first step to engaging with cross-border payments is recognising these challenges
130、.The most comprehensive effort to address the persistent difficulties involved in the deeper integration of cross-border payments systems is being spearheaded by the CPMIs Roadmap for Enhancing Cross Border Payments initiative,overseen by the Financial Stability Board.Its objectives consist of five
131、focus areas(Figure 1)which,together with their respective building blocks,address three cornerstone issues persisting THE CPMI ROADMAP INDICATES THE NEED FOR NBFIs TO BE SUBJECT TO REGULATIONS“PROPORTIONATE TO THE RISK THEY POSE.”omfif.org/dmiDMI Future of Payments 2022 1617in present cross-border p
132、ayments ecosystems:payments system interoperability and extension;legal,regulatory and supervisory frameworks;and cross-border data exchange.PAYMENTS SYSTEM INTEROPERABILITYOn interoperability,several technological innovations are contributing to more efficient systems.One promising development is I
133、SO 20022,a universal message standard for the financial industry introduced by the International Organization for Standardization and associated with building block 14 of the roadmap.By providing a metadata repository along with a maintenance process,ISO 20022 offers a common language for data excha
134、nge.In this way,the system provides a means for communication between financial institutions and their payments ecosystems.Over 70 countries have already migrated to ISO 20022,from South Africa and Japan to Switzerland.According to the ISO,convergence into one standard is the long-term objective.And
135、 it appears headed in that direction.From March 2023,Swift will also transition to ISO 20022 and a BIS publication from this year anticipated that most of the worlds payments systems will adopt the standard by 2025.The hope is that the standardisation brought about by ISO 20022 will alleviate some o
136、f the current bottlenecks in data processing across jurisdictions.Interviewees shared a positive outlook on the standards potential for easing interoperability.Progress is also being made on building block 15,harmonising application programming interface protocols,software interfaces that enable com
137、puters to communicate with one another,precluding the need for end user operation.Bringing APIs into alignment has the potential to help streamline payments operations though automation,significantly improving efficiency.Harmonising APIs can also facilitate payment orchestration.The latest iteration
138、 of the CPMI roadmap found that a growing number of payments systems are in the process of being interlinked by leveraging APIs,a trend that is anticipated to continue.In response,the CPMI intends to play an active role in kick-starting the initiative for the harmonisation of APIs and is in the proc
139、ess of establishing a working group consisting of API developers and representatives from governance bodies to collaboration on harmonisation.In addition,the increased adoption of payment-versus-payment mechanisms(building block 9)is helping streamline foreign exchange transactions across platforms.
140、While PvP arrangements are available for the most-traded currency pairs,PvP adoption is needed in all jurisdictions to help remove frictions in correspondent banking.The CPMI is consulting with both domestic and international stakeholders until January 2023,the findings of which will be the basis of
141、 an implementation plan.Discussions with practitioners in the cross-border payments space indicate that multilateral platforms are exploring the use of new tools and innovations,such as distributed ledger technologies,blockchain,cloud technology and artificial intelligence.Although they are still in
142、 the early stages of the development,these potentially more disruptive technologies could also have significant potential to facilitate payments system interoperability within fiat-based systems.REGULATORY AND SUPERVISORY FRAMEWORKS Under building block four,the CMPI roadmap also highlights three ar
143、eas where regulatory gaps exist and may need to be addressed by international standards.First,while robust regulation is in place for banks in respect of their cross-border payments activities,non-bank financial institutions are not yet subject to the same level of supervision.The CPMI roadmap indic
144、ates the need for NBFIs to be subject to regulations proportionate to the risk they pose,as inconsistent standards or implementation could lead to blind spots about potential risks or risk management gaps within the financial system.Devolder noted that creating a level playing field among banks,NBFI
145、s and fintechs is something the G20 is working towards.She emphasised that regulators in the fintech space need to strike the balance between fostering innovation and ensuring entities involved in payments are subject to the same regulations and operational requirements.The second regulatory gap ide
146、ntified by the CPMI roadmap is the transparency of information provided to end users about transactions.According to a Swift white paper from January 2022,unique transaction identifiers could offer a solution.Industry-wide adoption of UTIs would help reduce risk and increase transparency across the
147、transaction system,which could be brought to fruition with widespread migration to ISO 20022.Lastly,the roadmap highlights cyber/technology risk regulation as a potential regulatory gap,addressed by building block five by applying anti-money-laundering and countering terrorist financing rules consis
148、tently and comprehensively.In response to the potential regulatory blind spot posed by a lack of comprehensive NBFI supervision,the FSB is establishing a working group to further explore and make recommendations related to the application of supervision to banks and non-banks concerning their cross-
149、border payments activities.Meanwhile,regarding the transparency of information provided to end users about payment transactions and cyber risk regulation,the FSB is creating workstreams to evaluate both issues.Originally planned for March 2022-March 2023,but delayed by one year,the next step for fac
150、ilitating regulatory harmonisation outlined by the CPMI roadmap is for the FSB to provide a report for public consultation on these three key areas.This stage should help address the gaps identified by the stock-taking exercise,which will then be followed by relevant national authorities to communic
151、ate their plans for alignment the following year.CROSS-BORDER DATA EXCHANGE Innovations like ISO 20022 are facilitating easier data exchange between financial institutions and payments services providers.But while demonstrable progress has been made on the technical interoperability of cross-border
152、payments systems,as well as harmonising their regulatory and supervisory frameworks,an interviewee expressed concern that data localisation is one area where things are moving aggressively and quickly in the wrong direction.This,they explained,is in large part due to the proliferation of data locali
153、sation requirements,or laws requiring data to be collected,processed and/or stored within a given country before being able to be sent abroad.According to data from the United Nations Conference on Trade and Development,over 70%BUT THE CHALLENGE OF FACILITATING CROSS-BORDER DATA EXCHANGE PRESENTS A
154、SIGNIFICANT HURDLE,UNDERMINING THE POTENTIAL FOR A FULLY CENTRALISED CROSS-BORDER PAYMENTS SYSTEM WITH A GLOBAL REACH1:Overview of CMPI focus areas and associated building blocks Source:FSB CPMI stage two report to the G20,2020REGULATORY,SUPERVISORY AND OVERSIGHT FRAMEWORKSPUBLIC AND PRIVATE SECTOR
155、COMMITMENT 1.Developing a common cross-border payments vision and targets2.Implementing international guidance and principles3.Defining common features of cross-border payment service levels4.Aligning regulatory,supervisory and oversight frameworks for cross-border payments5.Applying AML/CFT rules c
156、onsistently and comprehensively6.Reviewing the interaction between data frameworks and cross-border payments7.Promoting safe payment corridors8.Fostering KYC and identity information sharingEXISTING PAYMENT INFRASTRUCTURES AND ARRANGEMENTS9.Facilitating increased adoption of PVP10.Improving(direct)a
157、ccess to payment systems by banks,non-banks and payment infrastructures11.Exploring reciprocal liquidity arrangements across central banks(liquidity bridges)12.Extending and aligning operating hours of key payment systems to allow overlapping13.Pursuing interlinking of payment systems for cross-bord
158、er paymentsDATA AND MARKET PRACTISES14.Adopting a harmonised ISO 20022 version for message formats(including rules for conversion mapping)15.Harmonising API protocols for data exchange16.Establishing unique identifiers with proxy registriesNEW PAYMENT INFRASTRUCTURES AND ARRANGEMENTS17.Considering t
159、he feasibility of new multilateral platforms and arrangements for cross-border payments18.Fostering the soundness of global stablecoin arrangements for cross-border payments19.Factoring an international dimension into CBDC designENHANCE CROSS-BORDER PAYMENTSAECDB omfif.org/dmiDMI Future of Payments
160、2022 1819of countries have implemented some form of data localisation requirement.China,India and Russia have the highest number of localisation measures in place three countries which have a low level of integration in cross-border payments system networks(though India began accepting cross-border
161、payments this year following a law passed by the Reserve Bank of India in September 2022).The move towards mandated data residency has had tangibly negative impacts on the efficiency of cross border payments systems.There are a variety of driving factors behind this trend.For one,there are genuine s
162、ecurity concerns associated with storing data abroad.Law enforcement wants to know that they can access relevant data in order to pursue cases to keep citizens safe,stated one interviewee.Therefore,law enforcement sees keeping data on shore as one way to do this and avoid what could be a complicated
163、 process to subpoena someone if that data is stored abroad rather than if it is stored locally.The same case can be made for regulatory oversight,evidenced in the US Securities and Exchange Commission initially pursuing data localisation for financial oversight purposes before backtracking.Another r
164、ationale for data localisation requirements is countries concern about the prospect of data being used by others and not by them for consumer protection considerations.Another expert in the digital payments industry noted that cultural constructs and consumer preferences around privacy vary signific
165、antly from country to country,with the European Union being an outlier in prioritising consumer data protection through its comprehensive General Data Protection Regulation.A less benign rationale in favour of data localisation is digital industrial policy,whereby policy-makers look to use data loca
166、lisation requirements to favour local cloud service providers.This strategy,though it has gained support among United Nations Conference on Trade and Development and other heterodox economists,is essentially a form of trade protectionism.And while countries,especially emerging markets,may have legit
167、imate developmental considerations which underly data localisation rules,the more barriers to cross-border data flows there are,the more difficult it will be to facilitate cross-border payments.GLOBAL PROBLEM,REGIONAL SOLUTION?In the absence of a globalised multilateral payment system,an interconnec
168、ted regional system could be the way forward.In 2018,the Eurosystem launched its Trans-European Automated Real-time Gross settlement Express Transfer(TARGET)Instant Payment Settlement(TIPS)infrastructure service,enabling individuals and financial institutions to transfer money between each other wit
169、hin seconds,irrespective of the opening outs of their local bank.As a currency union,the euro area has the benefit of bypassing the foreign exchange challenges facing cross-border payments systems,making it easier to develop payments infrastructure among member countries.Since its inception,however,
170、the central banks of Sweden,Denmark and Norway have also expressed interested in joining TIPS.The Eurosystem and Sveriges Riksbank are actively exploring a potential cross-currency settlement feature(including PvP)with TIPS,which would integrate transactions between the euro and krona.Among developi
171、ng countries,Association of Southeast Asian Nations member states are also working towards a regionally integrated payments network.In April 2021,the Monetary Authority of Singapore and the Bank of Thailand inaugurated a novel linkage of real-time payments systems,which resulted in markedly lower tr
172、ansaction costs and faster processing speeds for cross-border payments between the two countries.What originated as a bilateral system has since become a blueprint for establishing a region-wide payments ecosystem.In November 2022,a memorandum of understanding on co-operation in regional payment con
173、nectivity was reached by several countries at the G20 Bali summit,expanding the system to include Bank Indonesia,Bank Negara Malaysia and Bangko Sentral ng Pilipinas.This collaboration is a part of Aseans aspiration for a region-wide connected payments system by 2025.Speaking at the summit,Ravi Meno
174、n,managing director of MAS,confirmed that Aseans effort in the cross-border payments space is aligned with the G20s goal of addressing existing frictions in global cross-border payments,creating new business opportunities and enabling inclusive growth.Another pioneering initiative in regional integr
175、ation is the Pan-African Payment and Settlement System.PAPSS was developed in response to a fundamental problem facing the African continent:Africa doesnt trade with itself it has the lowest trade among all continents,and trade is critical to economic prosperity,explained PAPSS Chief Executive Offic
176、er Mike Ogbalu.Considering all the different things that affect trade,we came to the realisation that,unless we deal with the subject of payment,African trade will not take off,and that will have an effect on the prosperity of the continent.The idea of the African Export-Import Bank,PAPSS is seeking
177、 to transform how payments are made across borders in Africa,facilitating the expansion and diversification of interregional and international trade on the continent.At present,80%of commercial cross-border transactions within Africa must travel halfway around the world to be processed,mostly throug
178、h the US or UK,before returning to the continent.This results in higher costs and more delays in cross-border payments,which PAPSS is aiming to alleviate.The PAPSS infrastructure supports multiple settlement currencies.Within the platform,each country can set their rates against any other currency.E
179、ach transaction then creates a settlement obligation,with only net positions moving between the different counties.Liquidity is provided by central banks,largely in line with the Principles for Financial Market Infrastructures settlement model,but the system supports multiple settlement models as we
180、ll.We recognise that there will be balance of trade issues and that flows may be skewed in favour of certain entities,stated Ogbalu.In response,a settlement guarantee fund of$500m was developed for west Africa,with intentions to increase this to$3bn as PAPPS scales across the continent.Currently,eig
181、ht central banks,50 commercial and seven switches(including both national and private sector ones)are connected to the PAPSS ecosystem.An additional five entities are in alliance with the network,including the settlement platform operated by the Arab regions payment and clearinghouse system,Buna.And
182、 the PAPSS network is expanding fast:We should be able to double the footprint we have today by the end of Q2 next year,stated Ogbalu.We are hoping to cover 70%-80%of the continent in the next three years,with the end goal being complete regional integration in payments systems across Africa.Ogbalu
183、expressed optimism at the prospect of developing region payments systems and having another platform,such as Swift,facilitating transactions between regional systems,thereby offering a hub-and-spoke model of cross-border payments.Dave Sissens,chief executive officer of RTGS.global,a financial market
184、 infrastructure facilitating cross-border payments in the wholesale market,also expressed optimism about a regionalised approach.He noted that:Given the existing trust between trading countries and counterparties,it makes perfect sense for regional solutions to thrive.With the launch of its pioneeri
185、ng project Nexus,a model for connecting national payment systems into a cross-border platform,a hub-and-spoke model is also being support by the BIS.Having entered the testing phase,the initiative is using simulated payments to test the interlinkage of the THE MOST COMPREHENSIVE EFFORT TO ADDRESS TH
186、E PERSISTENT DIFFICULTIES INVOLVED IN THE DEEPER INTEGRATION OF CROSS-BORDER PAYMENTS SYSTEMS IS BEING SPEARHEADED BY THE CPMI.$661bnValue of personal remittances in 201970More countries are migrating to the ISO20022,a universal message standard for the financial industry70%Data localisation rules h
187、ave been put in place by most of the worlds countries80%The majority of cross-border transactions in Africa have to travel outside of the continent to be processedpayments systems of Singapore,Malaysia and the euro area,with the hope of expanding to include more national payments systems.THE WAY FOR
188、WARDConversations with experts in the cross-border payments systems space suggest that the CPMI roadmap has been positively received there appears to be a general sense that regulators and private sector innovators are aligned in their desire to improve the cross-border payments landscape.Technologi
189、cal and regulatory progress is being made,with developments in both interoperability and regulatory harmonisation.But the challenge of facilitating cross-border data exchange presents a significant hurdle,undermining the potential for a fully centralised cross-border payments system with a global re
190、ach.Cross-border data flows are a crucial element to the development of any efficient multilateral payments ecosystem,but the protectionist trend reflects a world which is becoming more fragmented,undermining the globalisation of payments systems.Concluding the final action for building block 17,the
191、 CPMI will publish a report considering the feasibility of new multilateral platforms and arrangements for cross-border payments by the end of 2022.In the meantime,regionally integrated payments networks offer an exciting prospect.Where multilateral initiatives stall,stand-out cases like Aseans RPC
192、and PAPSS illustrate the promise of regional projects,which could be especially exciting for developing markets.As a completely globalised and centralised retail payments system seems increasingly unlikely,a hub-and-spoke model is certainly an alternative worth exploring for the future of fiat-based
193、 cross-border payments.omfif.org/dmiDMI Future of Payments 2022 2021REMITTANCES proved surprisingly resilient during the pandemic and inflows for 2021 were very strong,reaching$773bn globally and$605bn for low-and middle-income countries.In addition to being a critical lifeline for families,remittan
194、ces play an important role in the economies of many countries.In 2021,30 countries received over 10%of their gross domestic product from remittances.Border closures and business lockdowns in the early days of the Covid-19 helped digital money movement options flourish.These offer a variety of advant
195、ages for senders and receivers,including cost,security and speed.However,only a third of remittances are initiated digitally and only one-third of those are picked up digitally.Focus needs to be on how to enable more of these digital transfers(see Figure 1).Costs are still high for the average remit
196、tance,but are much lower for digital remittances and in cases where people can compare multiple options.As of the second quarter of 2022,World Bank remittance price data show that:The average$200 remittance costs 6%this is the headline number policy-makers most often mention.The digital remittances
197、index(for remittances digitally initiated in an online or self-assisted way)is 4.8%.The Smart Remitter Target(SmaRT)index(a measure of what a savvy consumer with access to sufficiently complete information could pay)is 3.4%almost at the 3%UN sustainable development goal target.These observations are
198、 confirmed by Visa Economic Empowerment Institute modeling of card-initiated digital remittances over the last two years.In the modeling,VEEI determined costs across several money transfer operators for 25 key global corridors and compiled three measures:the average cost,lowest cost and highest cost
199、.The average costs for a$200 remittance across all WHY REMITTANCES MUST GO DIGITALRemittance inflows are criticaland they have been resilient in challenging times,by Chad Harper,senior fellow,Visa Economic Empowerment InstituteMIGRANT WORKERS MUST BE ABLE TO COMPARE OPTIONS AND SEND REMITTANCES DIGI
200、TALLY.THEIR FAMILIES MUST BE ABLE TO THEN SPEND THE FUNDS DIGITALLY AT BUSINESSES IN THEIR COMMUNITIESMTOs and corridors declined to 3.9%from 4.2%in 2022,a drop of 10%.The average of the lowest costs declined to 2.1%in 2022 from 3%,a decline of almost 30%this measure is roughly analogous to the Worl
201、d Banks SmaRT index.By contrast,the average of the highest costs went up to 7.1%from 6.2%,driven largely by two corridors,where MTOs were offered dramatically different pricing.Migrant workers without the ability to check multiple options could have paid exceptionally high prices(and some undoubtedl
202、y did)during this period.Overall,while the average price of a remittance in the research was 3.9%,VEEI was able to find costs below 3%in 20 of the 25 corridors in 2022.Clearly,the ability to send remittances digitally and to easily compare transfer options make a big difference to senders and their
203、families.So,what needs to happen?Traditional remittances must become digital.Cash-initiated remittances are the most expensive way to send a remittance and it is perhaps worse on the receiving end many MTOs maintain vast cash out networks in receiving countries and this adds appreciable costs to rem
204、ittances today.Migrant workers must be able to compare options and send remittances digitally.Their families must be able to then spend the funds digitally at businesses in their communities.None of this can happen without basic digital infrastructure.Innovation must be facilitated by more consisten
205、tly applied compliance rules and consumer choice needs to be promoted by making it easier for remittance providers to bring new innovations to market.UNLOCKING THE BENEFITS OF DIGITAL REMITTANCESFive steps will help unlock the benefits of innovation and digitalisation for more people while also upli
206、fting businesses and communities.First,begin with digital enabling infrastructure if it does not already exist.The digital receipt and use of remittances will be a non-starter without basic enabling infrastructure.For millions of people,basic infrastructure like electricity will be a barrier to the
207、digitalisation of remittances,payments and commerce.Beyond electricity,internet connectivity and broadband connectivity will be crucial.Second,focus on digital enablement broadly,keeping both consumers and businesses in mind.While the digital receipt of remittances is critical for further progress o
208、n efficiency,the larger goal is to digitally enable everyone,everywhere to fully participate in this new world.Individuals need to be able to receive remittance funds and use them digitally,with ubiquity.This requires digitally enabling businesses,especially small businesses,helping them to accept d
209、igital payments and to connect them to digital marketplaces.Therefore,consumers and businesses must both be part of the equation in achieving digital ubiquity.Countries that have driven digital ubiquity most successfully over the last decade have worked to drive adoption on both sides.Third,aim for
210、an open,interoperable digital ecosystem built on a foundation of resilience and security.Interoperability should be favored over uniformity more paths are better than one.A truly interoperable service should be able to reach as many endpoints as possible:traditional bank accounts,prepaid accounts an
211、d digital wallets.Fourth,streamline the compliance environment to reduce cross-border frictions.While the private sector is innovating,competing and improving speed and efficiency,policy-makers have a key role to play.Remittances go through a number of regulatory regimes that currently add frictions
212、.But these can be reduced by streamlining and aligning compliance rules as much as possible.Finally,simplify the licensing process to allow remittance innovation and competition to thrive.Policy-makers can also help the private sector introduce innovations more quickly and with less burden.Consisten
213、t licensing requirements would help remittance service providers enter and operate across multiple geographies with less friction.Streamlining licensing requirements and processes will help new market entrants bring the benefits of digital remittances to more corridors,and therefore to more people.F
214、igure 1:There has been a shift to digital remittances,but most are still traditionalDigital remittance trends over 24 quarters,2016-2022Source:VEEI/Devtech Systems analysis of WBG Remittance Prices Worldwide Quarterly data939393929292987868685838282844555567789992132
215、3242023434444456660708090100Q22016Q32016Q42016Q12017Q22017Q32017Q42017Q12018Q22018Q32018Q42018Q12019Q22019Q32019Q42019Q12020Q22020Q32020Q42020Q12021Q22021Q32021Q42021Q12022Q22022Traditionally initiatedDigitally initiatedDigital end-to-end omfif.org/dmiDMI Future of P
216、ayments 2022 2223 omfif.org23CRYPTOS CRUCIAL APPEAL FOR EMERGING MARKETSThe benefits of accessibility offer the best hope for digital currencies to have a profound impact on payments systems.By Lewis McLellanIN developed markets,cryptocurrencies have had little hope of catching on as mainstream chan
217、nels for payments.If one can rely on stable prices and trustworthy institutions,the volatility of cryptocurrencies makes them an unpopular choice as a means of exchange,though they are a popular speculative investment.The currency in which most goods and services are paid for,and taxes and wages are
218、 paid in,is typically the currency in which most citizens will keep their assets.If the systems and institutions serving fiat currency function effectively,then the primary appeal of cryptocurrencies for most will be as a speculative asset.However,when a domestic currency is dysfunctional,citizens a
219、re more eager to look for an alternative.Traditionally,this has been the dollar.The arrival of cryptocurrencies and their stablecoin cousins has added new alternative systems for citizens and businesses.A cryptocurrency is a token traded on a distributed ledger a form of record-keeping that can prov
220、ide security without the need for an intermediary.Stablecoins are cryptocurrencies that,rather than having a value determined by the marketplace,seek to maintain parity with another assets value,typically the dollar or another fiat currency.There are three basic advantages that cryptocurrencies offe
221、r in cross-border payments when compared to traditional methods.First,because cryptocurrencies can be traded in the absence of an intermediary,they do not rely on institutions opening hours for operations.This simple distinction offers a major advantage in cross-border payments,where time zones mean
222、 that,for 1.For countries with high inflation and strict capital controls,cryptocurrency offers a popular,though risky,alternative to the traditional financial system.2.Stablecoins offer many of the benefits of cryptocurrencies without the volatility,but not all are safe and robust solutions.3.Vulne
223、rable nations should invest in bringing down the cost of remittances and broadening access to financial services to reduce the exposure of vulnerable economic groups to volatile and unsafe cryptocurrency products.some corridors,settlement can take over a day as transactions wait for correspondent ba
224、nks to open to be settled.Second,though cryptocurrency transactions are not free,many can offer savings versus some of the more expensive remittance corridors.Cryptos final advantage is accessibility.This is particularly an issue in emerging markets.According to the World Bank,1.4bn people around th
225、e world are unbanked.Whether the challenge is simply accessing physical infrastructure,overcoming high fees,a lack of trust in institutions or the absence of the requisite identity documents,cryptocurrency offers an opportunity for many of these people to have access to digital money,rather than rel
226、ying on cash.There are,of course,risks that come with embracing cryptocurrency as an option,discussed below.However,there are drivers behind demand for cryptocurrency in emerging markets distinct from the primarily speculative demand in high income countries.POTENTIAL DOMESTIC CURRENCY PROBLEMSInfla
227、tion Many cryptocurrency fans claim that one of the chief advantages of bitcoin over fiat currencies is that it provides a hedge against inflation:the erosion of purchasing power by price increases.Unlike fiat currencies,bitcoin has a fixed supply.More bitcoins are being produced at a steady and dec
228、lining rate.There are currently around 19m bitcoins in existence and there will never be more than 21m.Bitcoin proponents believe that this fixed supply will protect bitcoin against inflation.While over its 12-year existence,bitcoins value and purchasing power has grown on average,that does not mean
229、 it will necessarily continue to do so or that it will remain stable.While money supply growth is a major contributor to inflation,there is little evidence to suggest that a fixed supply of bitcoins would have a constant stable purchasing power,particularly in a world where taxes and salaries contin
230、ue to be denominated in fiat currency.Gold is often regarded as a hedge against inflation.On a sufficiently long timeline,demand has kept its price ahead of inflation,meaning gold holdings have maintained their purchasing power.Bitcoin is often likened to a digital form of gold,with fans claiming th
231、at it provides a similar hedge against inflation but can be held and transacted digitally,without intermediaries.Bitcoin,though it has proven relatively stable over the past few months,fell in value from around$47,100 at the end of March 2022 to around$17,300 in mid-November.This kind of precipitous
232、 decline undermines its value as an inflation hedge.It will be a long time before bitcoin has earned the same trust as an inflation hedge that gold has achieved.However,some fiat currencies around the world have long track records of painful inflationary dynamics.According to an article in El Pais,A
233、rgentinas average annual inflation over the last 100 years has been 105%.This kind of inflation is one of the principal reasons citizens lose faith in their domestic currencies.For citizens of countries with comparatively low and stable inflation,it can be difficult to imagine living in a situation
234、where the purchasing power might be drastically lower just a month after a salary has been paid.Citizens in such countries typically turn to the dollar,where the value of their savings is relatively stable,rather than being eroded by domestic inflation.Many merchants will accept payments in dollars
235、for the same reason.A similar dynamic has been at play in Turkey,where the latest annual inflation figure was 85.5%.In such conditions,the dollar becomes a more popular option and hugely in demand.Bitcoin is,for many,even more easily accessible than the dollar since it does not require either a bank
236、 account or access to physical cash.Accordingly,adoption is high since it can provide a means for citizens to shelter their savings from inflation.Some will choose to exchange as much of their salary as possible for dollars or cryptocurrency,only buying enough of their local currency to cover expens
237、es.However,when collapses like this years monumental decline do occur,many of the victims are likely to be in lower income economies in economically fragile situations.Stablecoins are a possible alternative to the instability of bitcoin and other cryptocurrencies.The most common stablecoins have val
238、ues pegged to the dollar.Users are still exposed to the foreign exchange risk of a decline in the value of the dollar,omfif.org/dmiDMI Future of Payments 2022 2425but this is a far less troublesome risk than exposure to bitcoins performance.However,stablecoins bring their own risks,discussed below.C
239、apital controlsDomestic inflation creates an incentive for citizens to buy foreign currency,particularly dollars.The frequent selling of domestic currency for foreign exerts a downward pressure on the value of the domestic currency,exacerbating inflation.To stem this,many governments choose to impos
240、e capital controls.This can make purchasing goods and services abroad holidays,foreign tuition or international e-commerce for example challenging and expensive.There is therefore a demand for a means of moving money across borders outside of government scrutiny.Some governments in this situation at
241、tempt to control the value of their currency with a peg:an official exchange rate.As of November 2022,the Central Bank of Argentina will purchase dollars for 157 pesos and sell them for 165.On the unofficial market,buying a dollar costs 285 pesos and they sell for 289.Those holding dollars will ther
242、efore benefit hugely from using illegal exchange rate providers,rather than the official sector.These conditions are far more fertile ground for the adoption of cryptocurrencies than the conditions in much of the global north.Traditionally,unofficial exchange rate providers rely on smuggling physica
243、l cash over borders but these methods are always vulnerable to loss through accident,robbery or seizure by law enforcement.With peer-to-peer digital transactions enabled by cryptocurrency,these risks can be mitigated.While such techniques for circumventing capital controls are illegal and the result
244、ant capital flight can prove damaging to vulnerable emerging market economies,it is undeniable that using cryptocurrency and stablecoin for this is part of the appeal they hold in these economies.AccessMany emerging markets have large rural populations with limited access to banking services.For tho
245、se in remote,rural areas,they may simply have to travel a long way to reach physical banking infrastructure,but even for those with access to remote banking services or local infrastructure,banking services can still be difficult to access.Some accounts cost money to open or maintain,which many in e
246、merging economies can ill afford.Even the cheapest accounts typically have overdraft fees.Simply avoiding banking services eliminates the risk of being hit with these fines.Particularly for those who have never used the banking system,these risks can seem uncertain and difficult to manage.Even for t
247、hose who might be willing and able to access banking services,a frequent limiting factor is that they are unable to produce the documentation necessary to verify their identity to the satisfaction of the banks.One of the consequences of reliance on cash is that it is difficult or impossible to build
248、 up an economic history that might be used by lenders to assess their creditworthiness.Without access to capital,their economic opportunities are limited.Access to the internet and,in particular,mobile phones has given many in emerging markets the opportunity to use banking services in ways they wou
249、ld not previously have been able to.But these still mostly require some identity verification.Cryptocurrency offers many an opportunity to engage in investment,borrowing and international commerce with lower barriers to entry.With internet access outpacing banking access,many turn to cryptocurrencie
250、s and stablecoins as a means of accessing digital payment systems and value storage,as well as credit via decentralised finance.However,the lower standards of investor protections and the volatility that periodically grips the cryptocurrency market can result in severe financial losses in economical
251、ly fragile communities.Lack of trust in institutionsA factor that often accompanies high inflation and an unstable currency is low trust in financial or public sector institutions.Argentina provides a valuable case study.During the 2001 recession,many citizens and companies were exchanging pesos for
252、 dollars and withdrawing them from banks,typically with the intention of transferring them to offshore accounts.To halt the flow of money out of the country,the government froze all bank accounts in early 2002,allowing only small weekly withdrawals from peso-denominated accounts.Eventually,dollar ho
253、ldings were redenominated into pesos at a rate well below the market rate of the time,with many people losing 65%of the value of their dollar holdings.With risks of events like this,it is no wonder that citizens of countries with unstable economies have concerns about leaving their assets in the con
254、trol of financial institutions and the reach of governments that most in more stable economies do not share.Cheapening remittancesFor many economies in emerging markets,remittances form a substantial part of their gross domestic product.Money transmitters often charge substantial fees for remittance
255、 corridors.The United Nations aims to bring the average cost of a remittance down from 6.4%to 3%,with no corridors charging more than 5%.This would result in savings of more than$18bn a substantial contribution to the GDP of remittance recipient countries.Making remittances more efficient and reduci
256、ng the share of value captured by money transmitters is a key policy aim for the Bank for International Settlements committee on payments market infrastructures.Though there are a variety of possible schemes for the improvement of remittances,some are already turning to cryptocurrency.The peer-to-pe
257、er nature means there are fewer intermediaries and the process can be completed more efficiently.Vietnamese remittances,around$18bn in 2021(just under 5%of GDP),cost an average of 7%in 2020,according to statistics from the World Bank.Much of the population,particularly in rural areas,may struggle to
258、 access the services of conventional fiat money transmitters.It is perhaps unsurprising therefore that cryptocurrency use in Vietnam is among the highest in the world,much of which is driven by remittance traffic.Second only to Nigeria,some 21%of Vietnamese respondents to a 2020 Statista survey said
259、 that they used or owned cryptocurrency.Peer-to-peer networks like bitcoin might cut out the middleman,but cryptocurrency transactions are not free.At present,bitcoin transaction fees are less than a dollar and are likely to provide savings compared with traditional remittance channels.However,these
260、 fees can fluctuate widely based on demand,peaking at over$60 in April of 2021.Nevertheless,despite the variability,these networks can,in theory,provide a valuable channel,particularly with the addition of other layers like the Lightning network(a layer 2 addition to the bitcoin blockchain that ease
261、s the load of transactions via netting).However,not everyone is keen to adopt bitcoin for remittances.In September 2021,El Salvadors president,Nayib Bukele,spearheaded a drive to make bitcoin legal tender in the country.One of Bukeles stated aims was to make it easier for citizens to receive remitta
262、nces from abroad.The move was,however,widely protested by citizens and,according to a survey conducted by the Salvadoran chamber of commerce,only 14%of merchants in El Salvador had processed a bitcoin transaction as of March 2022.Around 24%of El Salvadors GDP came in the form of remittances in 2020.
263、World Bank data suggest El Salvador already operates a fairly cheap STABLECOINS ARE CRYPTOCURRENCIES THAT,RATHER THAN HAVING A VALUE DETERMINED BY THE MARKETPLACE,SEEK TO MAINTAIN PARITY WITH ANOTHER ASSETS VALUE,TYPICALLY THE DOLLAR OR ANOTHER FIAT CURRENCY105%Argentinas average annual inflation ov
264、er the last 100 years omfif.org/dmiDMI Future of Payments 2022 2627remittance corridor,losing only 2.9%on average per transaction below the UNs target of 3%.Despite this,some corridors are markedly more expensive and many require senders and recipients to present and collect cash in person.Some 16%o
265、f remittance corridors take more than two days.And 24%make funds available the following day.According to El Salvadors central bank,a mere 1.7%of the remittances sent from the US to El Salvador in the first half of 2022 were denominated in cryptocurrency(almost all of it in bitcoin).While it is poss
266、ible that,over time,acceptance of bitcoin for remittances will grow in El Salvador,download figures for the state sponsored Chivo Wallet application have been low since the initial surge.Many users downloaded the app and used the$30 worth of bitcoin they were given free by the government but have ma
267、de little further use of it.There is another issue with using cryptocurrency for remittances.Since few people are paid in bitcoin or,even in El Salvador,can use it for many of their day-to-day purchases,senders will have to buy it in their local currency,send it to the recipient,who will have to sel
268、l it for their local currency or,more likely,sell it for dollars and then buy their local currency with dollars.This adds foreign exchange risk to the transaction that,particularly with bitcoin,can seriously impact the amount sent and received.This risk might be mitigated in cases where the domestic
269、 currency is suffering from high inflation or an otherwise unstable value.Using stablecoins might mitigate this risk,although there may be liquidity issues in exchanging the stablecoin for local fiat currency.STABLECOINS Many of the risks and frictions relating to the use of cryptocurrencies for pay
270、ments in emerging markets stem from the fact that for most day-to-day users,spending them creates foreign exchange risk because,even where cryptocurrencies are accepted for payments,prices are almost always denominated in fiat currency.Stablecoins obviate that risk since they are typically pegged to
271、 the dollar or another major fiat currency.Stablecoins,though designed to have a fixed value relative to a given fiat currency or commodity,are nevertheless not risk free.It is important for stablecoin users to understand that the risks they face when holding stablecoins are not equivalent to the ri
272、sks posed by holding dollars,either in cash or in a bank account.The risks of cash are simple and well-known.The purchasing power may fall thanks to inflation or moves in foreign exchange rates,and theft or damage are always risks.It is obviously limited in applicability since it can only be used in
273、 person.Bank accounts prevent loss from theft and damage.Interest offers some compensation to inflationary value erosion.Bank deposits,however,represent a claim on the banks credit and create risk.To some degree,this can be mitigated with state deposit protection schemes,but particularly in emerging
274、 markets,these are not infallible.While bank accounts facilitate digital transactions,many citizens of emerging markets are unbanked and find it difficult to obtain traditional banking services,limiting their value.Many countries in emerging markets have,to a greater or lesser extent,adopted the dol
275、lar as the currency for everyday use.Smaller currencies with thin foreign exchange liquidity struggle with acceptability offshore.This means there is a need for dollars to pay for imported goods and the dollar therefore underpins substantial amounts of economic activity in many emerging markets.Doll
276、ar-denominated stablecoins offer a potentially valuable means for citizens of emerging market countries to get access to digital dollars,which might otherwise prove challenging because they cannot access traditional banking services.This can offer them a means of engaging in international e-commerce
277、,buying and selling goods and services internationally.Freelancers around the world can compete for jobs in a global marketplace.The low transaction fees for on-chain transactions typically represent a saving versus most digital payments providers and,combined with relatively quick settlement times(
278、usually minutes rather than hours or days)and smart contract automated payment-versus-payment foreign exchange conversions.This also makes it a potentially valuable channel for the distribution of aid payments.For those without access to traditional banking services,but with internet access and smar
279、tphones,it offers a means of making aid payments in a more secure,traceable and useful manner than physical cash,which can be lost,damaged or stolen more easily than digital equivalents.The US government has made use of stablecoins to send foreign aid to Venezuela.Since they are peer-to-peer,they of
280、fer a means of circumventing transaction systems and banks that might be under the control of a hostile or dangerous government.Since stablecoins exist on blockchains,which can process transactions 24 hours a day,stablecoins can also facilitate foreign exchange transactions by enabling payment-versu
281、s-payment transactions.This eliminates settlement risk by ensuring that one currency is transferred only if the recipient currency is also sent.This reduction of risk means less capital is required and brings down the cost of currency exchange.RISKSThe risk profile for stablecoins is different to th
282、at of cash or bank accounts.Indeed,it is difficult to generalise since the risk profile will be different for each protocol.Much of the risk stems from the assets that collateralise stablecoins.In early 2022,the world was treated to an example of the damage a collapsing stablecoin can do.Terra was a
283、n algorithmic stablecoin that attempted to maintain parity with the dollar through a peg to Luna,a cryptocurrency promising yield based on staking(a form of high-yield lending operation in the cryptocurrency world).When trust in Lunas yield failed,a run on Terra began and the inability to meet inves
284、tors demands to cash out shook confidence in the cryptocurrency ecosystem,triggering a broad devaluation,resulting in several high profile margin calls and insolvencies.To be sufficiently reliable for widespread use for the purposes described above,stablecoins must be backed by cash and cash-like as
285、sets.There must be a sizable proportion held in cash such that they are able to meet large-scale redemptions immediately.Some stablecoins have large,highly liquid,frequently audited reserves capable of meeting redemptions.Others have less high-quality collateralisation and lower standards of transpa
286、rency.Either through limited choice or limited information,emerging market users may not always be able to rely on the provision of high quality stablecoins.The risks grow as the size of the stablecoin grows since even highly liquid assets take time to sell in large volumes and can cause market move
287、ments.Holdings large enough to collateralise a widely-used,globally-available stablecoin will have a wider effect on the economy.A rapid sale of large amounts of assets short-dated government securities for example might drive down the price and force margin calls or otherwise disrupt funding operat
288、ions.As well as issues around collateralisation,there are potential operational risks.Stablecoins operate on blockchains.While the core of blockchain cryptography is typically robust,there are several different layers of services such as custodians/wallets,interoperability bridges,on/off-ramps and s
289、mart-contract payments which bring their own vulnerabilities and have been exploited by hackers.DOLLARISATIONThe very ease of access and use that stablecoins provide creates further risks for emerging market countries.While the risk of citizens moving their savings into dollars has been present for
290、far longer than stablecoins have been around,the availability of physical cash,risk of storage and accessibility of merchants prepared to accept dollars have all proven checks on the viability of stockpiling the currency.However,with the advent of a digital,globally accessible dollar-like cash instr
291、ument,many of these difficulties disappear.The International Monetary Fund warned in June this year that stablecoins could displace national currencies,particularly currencies seen as less convenient to use or volatile in value.The publication suggests that even volatile cryptocurrencies like bitcoi
292、n might in addition to enabling capital flight,be preferred to the local currency during economic turmoil.However,it adds that the dollar is likely to be the preferred choice,particularly if an easily available digital version exists.This substitution effect might exacerbate fragilities in emerging
293、market banking systems as they lose deposits to stablecoins,particularly if these are remunerated.1.4bn Number of people who are unbanked,according to the World BankTHE INTERNATIONAL MONETARY FUND WARNED IN JUNE THIS YEAR THAT STABLECOINS COULD DISPLACE NATIONAL CURRENCIES,PARTICULARLY CURRENCIES SE
294、EN AS LESS CONVENIENT TO USE OR VOLATILE IN VALUE omfif.org/dmiDMI Future of Payments 2022 2829ALTHOUGH CRYPTOCURRENCY is still in nascent stages,91%of crypto holders believe itll become as common as card payments.Despite making major strides,existing electronic payment systems suffer in regards to
295、cost,efficiency and access.Legacy systems still fall short of providing access to financial services to 1.7bn adults or efficient cross-border retail payments.Blockchain technology brings the benefits of faster settlement,access to new customers and lower barriers to entry.Blockchain networks handle
296、 international transactions in minutes as opposed to the traditional days or hours.They can settle transactions for under$0.01,considerably cheaper than traditional payment card networks.The rise of stablecoins has highlighted shortcomings in traditional cross-border payments.Studies show that distr
297、ibuted ledger technology improves the efficiency of cross-border payments and blockchain technology could help banks save$27bn by 2030 on international transactions.Cross-border payments matter.They account for 15%-20%of ecommerce value.Small-and medium-sized enterprises,making up 90%of businesses a
298、nd 50%of jobs globally,need easier access to international payments.Remittances are a$589bn market and a major source of capital for developing countries.They are also a lifeline for 281m migrants.Cryptocurrency is making a dent in this market,dominated by international operators,with Africa seeing$
299、562m worth of cryptocurrency inflows.Although various forms of cryptocurrencies are used for payments,stablecoins and central bank digital currencies have won favour for their stability.Stablecoins are primarily used for trading,lending or borrowing digital assets,but could become used widely as a m
300、eans of payment if well designed,interoperable and buttressed by regulatory guardrails.Payments giants are taking notice:Visas network allows people to settle transactions in USD Coin,a dollar stablecoin,and Moneygram partnered with Stellar to offer stablecoin for fiat remittances in India.Internati
301、onal remittances cost an average of 6.4%for$200.A transaction could involve up to four intermediaries.Fluctuating exchange rates exacerbate inefficiencies.And the burden is disproportionately borne by underprivileged segments,with fees for cross-border retail payments reaching 10%.The Financial Stab
302、ility Board wants to get remittance fees to the UN sustainable development goal of 3%and 1%for retail fees by 2027.International stablecoin transactions cost less than 0.1%.Sending crypto to another user on the Binance Smart Chain costs between$0.01-$0.10.Cross-border retail payments can take days t
303、o clear due to the number of intermediaries.Crypto transactions clear within seconds;a great way to meet the FSBs target of clearing 75%of transactions within one hour.All financial institutions must have a cross-border payments option,for retail,wholesale and remittances.Cryptocurrencies can addres
304、s access challenges such as multilateral settlement eligibility and the lack of correspondent bank relationships.Users must be provided with information about how much a transaction will cost,how long it will take,its status as well as terms of service-all automatically visible in a blockchains publ
305、ic ledger.These improvements are consistent with the G20 Roadmap for enhancing cross-border payments and its four challenges and targets,covering cost,speed,access and transparency,to be met by 2027.CBDCs offer the unique advantages of central bank money:settlement finality,liquidity and integrity,w
306、ith emerging markets leading on adoption.Interoperable CBDCs are key for cross-border payments.Interlinking CBDC systems through a hub and spoke or single system might bring more improvement to the market than compatibility or single access points.International co-operation in early stages is necess
307、ary to address underserved cross-border corridors.Crypto for payments regulation should follow a risk-based approach specific to the tools structural features,usage and risks.With risk management and regulatory guardrails,stablecoins and CBDCs could become the go-to payments solution for cutting edg
308、e technology,such as in the metaverse.Stablecoins have been critical to decentralised finances.The future of payments,backed by new digital currencies,is looking bright.CRYPTOCURRENCIES CAN IMPROVE SPEED,COST AND EASE OF ACCESS OF PAYMENTSProper regulatory guardrails are needed for people to enjoy t
309、he benefits of a payments revolution,writes Rana Kortam,director,global public policy at Binance.BASKET-BACKED STABLECOINSThus far,the discussion has focused on fiat-pegged stablecoins,since these are the most common.However,there are a variety of proposals for stablecoins backed by a basket of asse
310、ts,with a value determined by those assets.Libra,a project of Meta,sought to establish a global stablecoin backed by a basket of currencies.Such a project would have had an enormous impact on cross-border payments.There would have been a clear benefit for using it,since a sender could buy this baske
311、t-backed coin with their local currency and send it to a recipient in another country who could redeem it in their own currency.However,the structure underpinning a basket-backed currency is complex.Either the value will fluctuate based on the changing value of the components,or the components must
312、be adjusted dynamically.If redemptions are unbalanced if a great many of the stablecoin are redeemed in euros,but not in dollars then there will have to be purchases of euro assets to keep the composition stable.This kind of system can have destabilising effects on the broader economy,particularly f
313、or smaller and less liquid markets.The risk of currency substitution is clear.Libras main proposal for the avoidance of substitution was to assist in the development of local currency stablecoins for concerned central banks.CONCLUSIONMany emerging market economies share certain features that make th
314、em particularly receptive to cryptocurrencies and stablecoins.Unstable currencies with high inflation encourage citizens to seek refuge in freely available digital alternatives like bitcoin.Strict capital controls encourage citizens to seek out less easily policed alternatives.Large unbanked populat
315、ions,particularly those with cultural mistrust of financial or government institutions,are inclined to seek out alternative methods of payments outside of the traditional sector.There are certainly benefits.Competition in the remittances space can only encourage better outcomes in terms of speed and
316、 cost for users and merchants.Reducing dependency on cash and promoting access to global markets can promote economic development.Insofar as cryptocurrencies and stablecoins can provide cheap and efficient payments systems,as well as opportunities to shield assets from inflation,they offer more valu
317、e for emerging markets than they do for developed markets.However,many emerging markets users are in economically fragile situations and are not equipped to deal with the losses that the volatility of cryptocurrencies make likely.It is important for central banks,commercial banks and payments servic
318、es providers to work together to ensure they can establish alternative systems that can offer the same benefits with fewer risks.BITCOIN IS,FOR MANY,EVEN MORE EASILY ACCESSIBLE THAN THE DOLLAR SINCE IT DOES NOT REQUIRE EITHER A BANK ACCOUNT OR ACCESS TO PHYSICAL CASH omfif.org/dmi31DMI Future of Pay
319、ments 2022 3031PROMISE AND PERIL OF CENTRAL BANK DIGITAL CURRENCIES Both developed and emerging markets are working toward implementation of CBDCs,but much of the action is concentrated in emerging markets,where the value propositions are clearer.By Julian Jacobs CENTRAL bank digital currencies may
320、overhaul how the global financial and monetary system works.By supplanting traditional fiat cash with a digital equivalent,CBDCs promise greater ease of use,access,convenience and oversight.These elements are,of course,beneficial for developed countries.Yet,it is in emerging markets that the benefit
321、s of CBDCs are clearest.As of 2022,1.7bn people remain outside the traditional financial system,the vast majority of which are in emerging markets.The results are economic inefficiency and less impactful stimulus policy.And limited access to affordable financial products can also lead to debt traps
322、and cyclical poverty dynamics.These elements were exacerbated by the Covid-19 pandemic.A well-designed and implemented CBDC could improve access to the financial system,while also helping stamp out criminal activity and making cross-border payments more efficient.Yet along with the benefits of centr
323、al bank digital currencies,there is also the potential for considerable risk,most notably in the form of financial instability,obstacles to CBDC adoption and trade-offs between security and freedom from governmental oversight.A CBDC,then,is likely to be immediately useful in developing countries 1.C
324、entral bank digital currencies hold the potential to significantly improve payments efficiency,particularly across borders,strengthen financial inclusion and ward against illicit economic activity 2.Despite these benefits,poorly constructed CBDCs threaten to erode trust in a countrys currency and mo
325、netary systems,while also assisting excessive government oversight and the growth of financial fraud3.Although developed countries continue to research and conduct small pilots of CBDCs,early evidence from deployment in several emerging markets is promising.Moreover,cross-currency CBDC exchanges,whi
326、ch are underdevelopment,may greatly improve foreign transaction efficiency.with weaker existing financial infrastructure and a greater share of the economy outside of the banking system.The benefits of a CBDC for developed countries will require a different analysis of its relative risks and rewards
327、.CENTRAL BANK DIGITAL CURRENCIES MAY IMPROVE FINANCIAL INCLUSION,SECURITY AND EFFICIENCYA general purpose CBDC would transform any economy.Instead of currency being largely deployed in physical cash and commercial bank liabilities,a government sponsored digital currency would assemble a digital ledg
328、er tracking and executing transactions between parties.Although some central banks are considering deploying a CBDC,not to replace cash but instead to complement it,the movement towards a wholly digital economic system would nonetheless be significant.The Bank for International Settlements predicted
329、 that 20%of the global population will use a CBDC over the next three years.According to the Atlantic Councils CBDC tracker,some 72 countries are exploring or developing CBDCs with a further 26 either launched or running pilots.The potential benefits that emerge from this are distinctive.Estimates a
330、bout illicit activity unsurprisingly range.About 2%5%of global GDP($800bn$2tn)is hidden to avoid taxation.Meanwhile,about$500bn is tied up in the illegal narcotics industry.A central bank digital currency would not eliminate these issues,but proponents argue it could greatly reduce the presence of t
331、hese elements in the economy for one reason:using a distributed ledger makes it easier to track,monitor and account for the movement of a digital currency.Illicit activity would be easier to spot and governments would have more transparent access to all market behaviour denominated in their currency
332、.These elements may be true for both developing and developed countries.However,they are particularly helpful in emerging markets,where there is often more limited infrastructure to track and ward against illicit finance.This is only true insofar as illicit activity is conducted in digital currency,
333、since cash remains difficult to trace and monitor.Although cash is still an extremely important channel for illicit economic activity,the presence of a CBDC might reduce legitimate reliance on cash and improve enforcement agencies ability to pursue criminal activity.These mechanisms of oversight and access are also what can make a CBDC an excellent tool to help reduce barriers to financial inclusi