Klaas Knot: Acta, non verba - interlinking fast payment systems to
enhance cross-border payments
Speech (virtually) by Mr Klaas Knot, Chair of the Financial Stability Board and President
of the Netherlands Bank, at the CPMI (Committee on Payments and Market
Infrastructures) conference on the "Progress and priorities on the G20 cross-border
payments roadmap", Florence, 11 July 2024.
* * *
Thank you for inviting me to speak today. I am sorry that I cannot be there with you in
person.
Just as Rome wasn't built in a day, the splendour of Florence didn't arise overnight.
Both cities are testaments to the power of time, artistry, and persistent dedication.
At the FSB, we don't build anything alike - but we are ambitious in a similar way. And
we take on projects that reach the same level of complexity. The G20 Roadmap to
enhance cross-border payments are not immediate and easy tasks. The Roadmap is
ambitious in its goal to improve the cost, speed, availability and transparency of
crossborder payments globally.
The complexity of this undertaking cannot be overstated. The cross-border payments
ecosystem is made up of countless individuals, businesses, and governments, relying
on a network of national and regional payment services providers and infrastructures.
And these themselves are subject to the laws and regulations of every jurisdiction in
which they operate.
As most of you will likely recall, the FSB and our partners, including the CPMI, began
this journey in 2020. We spent the first two years exploring a wide range of possibilities
to address the frictions that cross-border payments face. This included practical
arrangements, operating practices, technological solutions and regulatory changes.
The work involved stocktakes and in-depth analyses. And it produced best practices,
and recommendations for how to improve existing arrangements and to develop
potential new arrangements.
In 2021, we published quantitative targets to define the ambition of the Roadmap and
establish a shared, concrete vision of the goals to be achieved. We then identified the
actions we would need to take to achieve the targets by end-2027. Based on this, we
transitioned, in February 2023, to a practical implementation phase, consisting currently
of 15 priority actions.
These priority actions are designed around three interconnected themes. The first
theme focuses on improving payment system interoperability and extending RTGS
operating hours and access policies. The aim of this is to shorten transaction chains
and reduce related frictions. The CPMI leads the work in this area. And we just heard
about the work underway on interlinking fast payment systems, including technological
innovations in this area. I just want to underscore the value of this work.
The second theme is to promote consistency in legal, regulatory and supervisory
frameworks for cross-border payments. Because the opposite can be a significant
source of frictions in cross-border payments. And unnecessarily increase the complexity
and, consequently, the cost of cross-border payments. This is not to suggest that laws,
regulations or supervisory practices should necessarily be relaxed or constrained. They
serve important public-policy goals. However, where unnecessary frictions are created,
we should seek to reduce or alleviate them.
For our part in the FSB, next week, we will publish a report for public consultation on
this topic. It consists of recommendations to strengthen consistency of the application of
regulation and supervision to banks and non-banks providing cross-border payment
services. We want to promote common minimum standards on a basis of "same
activity, same risk, same regulation". In doing so, we aim to create an environment of
trust for consumers, banking intermediaries and infrastructure providers, including fast
payment systems.
Actions under the Roadmap also include work by the Financial Action Task Force, or
FATF, to strengthen their guidance on anti-money laundering and combatting the
financing of terrorism: AML/CFT. In February, FATF completed its guidance on
beneficial ownership. Currently, it is assessing the responses to its public consultation
on updating its rules on wire transfers. This way, it will take account of recent and
upcoming developments in the architecture of payments systems.
Later this year, the FSB expects to announce that yet another international organisation
will be joining the Roadmap ambition.
The third theme focuses on facilitating cross-border data exchange and increasing the
use of standardised messaging formats for cross-border payments. The global
transition to the ISO 20022 standard is underway. However, inconsistent use of the
standard could limit its benefits in enhancing straight-through processing and the
interlinking of payment systems.
Data lies at the heart of payments. But data standards, frameworks and formats vary
significantly across jurisdictions, infrastructures and message networks. The efficient
transfer of data supports cheaper, faster, and more transparent payments. And it also
supports our shared interest in combatting financial crime, such as fraud and money
laundering, and terrorist financing. Here, the FSB has explored the interaction between
data frameworks and cross-border payments. This way, we want to contribute to
greater alignment and interoperability of cross-border payments services.
Data frameworks and regulations aim to preserve the security of transactions, limit AML
/CFT, and protect the privacy of citizens. However, the fragmentation in data
frameworks across jurisdictions is a major barrier to automating cross-border payments
and preventing fraud. Using our convening power to reach beyond financial authorities
and engage with data privacy and data protection regulators, the FSB has developed a
set of recommendations.
With these, we want to:
promote standardisation and uniform implementation of payment-related data
requirements.
address conflicting requirements, such as those related to data privacy and to AML
/CFT.
create trusted avenues for the cross-border flow of data while supporting data
privacy.
And encourage progress on promising innovations to reduce frictions in
crossborder payments.
Next week, these recommendations will be issued for public consultation and I
encourage you to provide feedback.
Much still needs to be done by both the public and private sectors. To support
jurisdictions' enhancement of payment systems, the IMF and World Bank have
launched technical assistance for cross-border payments, and encourage jurisdictions
to engage with them. But no action can be conceived without global coordination and
without purposeful and proactive engagement with the private sector. This event is an
excellent example of engagement of public and private sector stakeholders on one of
the priority actions.
In addition, the FSB and CPMI have each established a taskforce comprised of the
public and private sectors. Their purpose is to facilitate the sharing of views and support
a shared commitment.
At the beginning of my contribution, I talked about the targets we want to achieve by
end 2027. What we need to keep on progressing towards these targets, is threefold.
First, we need continuous commitment from the regulatory community to finalise
the work that is in progress. The FSB is committed to making sure that this
happens.
Second, we also need a shared commitment to improving cross-border payments,
both from the public and the private sector. The onus to turn some of the
completed priority actions into reality rests with the private sector, with the support
of the public sector.
Third and finally, we need specific attention to those regions and market
segments that find themselves furthest from the targets. This is the case, because
we may need a more in-depth understanding of the market practices and a
dedicated action plan for those regions in order to see substantial progress at a
global level.
Indeed, Rome wasn't built in a day. Nor did the splendour of Florence arise overnight.
They required time and dedication. Conferences like this create the necessary time - to
reflect, make connections, and share insights. And above all, they provide the
inspiration to stay dedicated to our ambitions - and make our goals a reality.
So let me wish you all good discussions and a lot of food for thought to inspire action
once you go back home.
Thank you.