The idea that payments can hop across borders using existing domestic instant-payment networks has moved closer to reality.
The successful instant transfer of funds from the U.S. to Europe took place in recent weeks as part of the new Immediate Cross-Border Payments (IXB) initiative orchestrated by Swift, The Clearing House and EBA Clearing, the organizations said Tuesday.
The Society for Worldwide Interbank Financial Telecommunications, TCH and EBA Clearing said in a press release that they had collaborated to prove the feasibility of instant cross-border payments in a test involving 11 banks.
Bank of America, BBVA Group, Citigroup, HSBC Holdings, Intesa Sanpaolo Bank, JPMorgan Chase and PNC Financial Services Group directly participated in the proof of concept, in which banks exchanged messages to synchronize the transmission of test transactions sent between domestic instant payment networks on each side of the Atlantic, the release said.
Societe Generale, ING Group, Deutsche Bank and Crédit Agricole also contributed to the concept’s design.
The effort underscores rising pressure on incumbent payment networks to modernize the cross-border payments experience as fintechs and blockchain innovators like
IXB’s next move will be to test its instant solution for cross-border payments in other key remittance corridors, the release said.
Observers say IXB could prove valuable for certain types of payments as consumer and cross-border payments continue to expand with the rise of the international gig economy and growing global e-commerce payment volume between commercial buyers and suppliers.
“Because one cross-border payment solution doesn’t fit every situation, there’s room for innovation and new entrants in the space will each have a place to play,” said Erika Baumann, a senior analyst with Aite-Novarica.
Typically, settlement times for cross-border payments sent through existing correspondent bank networks are uncertain because parties using disparate systems can’t confirm the funds’ arrival within a universally accessible channel, Baumann said.
“It’s also hard to predict what the correspondent fees will be along with the exchange rates, and when a second fee is added [to cover unexpected costs], it adds intangible costs from manual intervention and strains relationships,” she said.
But the wire transfer options available to banks are evolving. Swift last year rolled out
“Until Ripple, Swift and its bank owners didn’t really have any competitors, but today there are dozens and Swift is much more nimble. Swift gpi is now pretty much instant for much traffic, and doing huge volumes,” Lodge said.
IXB’s idea of combining Swift’s broad connections to global banks with well-established domestic real-time payments networks brings impressive reach and overlap, Lodge said.
“In an increasingly real-time world, there needs to be a system that is better suited to the needs of instant cross-border payments," he said. "TCH reaches about 60% of all U.S. bank accounts, EBA is owned by the biggest banks in Europe and there is common ownership in between.”
