Global collaboration is important for all aspects of financial services, but for payments, it is crucial. The G20 roadmap is creating a stronger sense of community, putting seamless payment systems within reach.

While it seems we have been living with cross-border payments for a long time, there is still a chasm between what fintechs and banks can deliver. Fintechs, which offer new technology they describe as disruptive to the traditional banking systems, still need the traditional banking systems to make it work. Banks, in turn, have been criticised for being too slow to update systems that are expensive to use and for not being innovative enough. But it seems the G20 roadmap has forced a public private partnership and real world projects may come to fruition in 2023.

One of the key points of the road map for treasury is expanding the use of payment versus payment (PvP) settlement in foreign exchange.

“At the moment, there is still too much risk in FX,” says Victoria Cumings, Chief Legal and Regulatory Officer at RTGS.global. “Lots of FX is settled without PvP, which means a lot of people are left vulnerable. Expanding the use of it is key and I really hope we are going to see some practical applications coming out of the G20 collaboration this year. Projects are now moving from a necessary period of guidance into deploying practical projects to achieve the goals of the roadmap, so we are at a point now where we are moving on from talking and exploring into doing.”

Cumings is heartened to see a maturing in the relationship between fintechs and banks into one that is less competitive and more of a public private partnership.

Nick Miles, Director of Business Development at RTGS.global, agrees that banks would not have considered collaboration with fintechs three years ago but are now coming round to the fact fintechs offer technology that banks do not have and cannot replicate quickly. But, despite the warming relationship, rising interest rates and decreasing liquidity still continue to play havoc with cross-border payments.

“Obviously, rising interest rates means it is more expensive to borrow,” he says. “Everyone wants to be paid faster but there are still some currencies that can only be settled two days forward, so there is still an element of risk. Contractual settlement dates are still too long and we need more liquidity across a much bigger currency base.”

Once again, technology claims to hold the answer, if regulators and banks can keep up, this time in the form of blockchains.

In a traditional cross-border payment, the ledger is not the same between the sender and receiver which adds security concern to the entire process. With blockchain, a group of nodes validates the monetary transaction and with fewer negotiators, a transaction gets completed in real time.

“Cross-border payments are slow and expensive, but blockchain has the potential to make a big difference in streamlining the process and removing intermediaries,” says Laurent Descout, Founder and CEO of Neo. “The technology can also enable data from banks to be available to smart plugins which will help the treasurer decide what is the best.”

Controversially, the use of cryptocurrency is also being considered. The most likely form is Central Bank Digital Currency (CBDC), controlled and issued by central banks. Around 100 countries around the world are looking into possibly creating their own CBDC, according to the International Monetary Fund. These include the US, China, the Eurozone and Sweden, but Descout warns it will be a long time before they become permitted as a form of secure payment.

“Following recent scandals, the unanimous view is that these assets must become more standardised, secure and robust,” he says. “The success of which will ultimately be measured in decades, not years.”