Central bankers, regulators and entrepreneurs are on a fast track to transform global payment systems into digital expressways that will include tokens and e-currencies. The goal is to provide instantaneous and secure transactions worldwide at little expense while eradicating settlement uncertainties. Group of 20 nations have set an ambitious goal: three-quarters of
cross-border payments will be made available to recipients within one hour in 2027.
The vision is as revolutionary as that for
artificial intelligence. Modernisation of the “back office” will drive global economic expansion by sweeping away difficulties that hamper every transaction from international trade to roadside purchases of handicrafts in remote villages.
Technologies can already be used to
transfer currency and assets from Hong Kong to Johannesburg, for example. But many obstacles stand in the way, the toughest related to liability, transparency, privacy, enforcement and dispute resolution.
These issues pit the primacy of state sovereignty against following international rules. As researchers from Goethe University wrote in 2021, “Money is not simply data but a complex bundle of rights closely
tied to the nation state”. Bankers wrestle with who will be in control. Governments are reluctant to cede authority.
Progress can’t come fast enough. Agustin Carstens, general manager at the Bank for International Settlements (BIS), recently told a session at the annual meeting of the International Monetary Fund (IMF) and the World Bank that “cross-border payments are a significant choke point in the financial system”. There is no effectively working and frictionless global system that everyone can readily access.
Solutions are key to strengthening financial stability by mitigating risk and enhancing liquidity in an ecosystem that handled 3.4 trillion transactions in 2023, accounting for US$1.8 quadrillion in value, according to McKinsey.
