This change is deeply felt by financial services providers which saw decreased domestic and cross-border transactions, including a projected fall of about 20% in remittances in 2020. This pandemic has also compelled central banks to reconsider the robustness of their national payments systems, implement electronic cashless banking options, and safeguard against cyber threats. Recent developments in cross-border payments landscape In recent years, the scale and importance of cross-border payments have grown in line with the growth of cross-border economic activities, with an estimated global transaction value of USD136 trillion in 2018. However, there is wide recognition that cross-border payment services remain inefficient, as compared to domestic payments. The common challenges facing crossborder payments can be attributed to cost and speed, lack of transparency, and limited access: Reliance on multiple intermediaries and correspondent banking with varying levels of operational efficiency, local requirements and cut-off times effectively lead to longer processing time and incur higher cost; Lack of transparency in the traceability and visibility of payment status, primarily due to lack of standardized payment status notification process; and Limited access of cross-border payment services, often caused by time zone differences and mismatch in operating hours of intermediaries. Given these challenges, I believe that more innovative approaches are required to ensure that users can access safe and affordable cross-border payment channels. If banks are not providing these critical cross-border financial services, users may resort to less- or non-regulated channels.

As a global messaging standard with richer data content, ISO 20022 has the potential to drive greater payments efficiency, facilitate risk management and compliance with regulations as well as facilitate cross-border connectivity. This move towards a common global standard will address issues relating to diverging regulatory and technical standards which have increased friction in making payments and made the cross-border payments landscape more complex. Embracing financial innovation to enhance cross-border payments efficiency Aside from the global pandemic, the other key disruption to our established view of cross-border payments is financial innovation. There has been growing awareness that the underlying technology for digital assets such as distributed ledger technology (DLT) may have the potential to improve payments efficiency, particularly from the cross-border payments perspective. Some central banks have made significant strides in exploring the potential of this technology, including testing the use of blockchain and DLT for clearing and settlement of payments and securities. The rapid shift from cash towards other payment platforms, has also intensified calls for central banks to issue Central Bank Digital Currency (CBDC) to protect the country’s monetary sovereignty. Many central banks, including BNM, are exploring the merits and feasibility of issuing CBDC. Preliminary findings highlighted that this may offer some solution to the challenges associated with cross-border payments (e.g. synchronised cross-border transaction between different currencies across different platforms, reduced number of intermediaries and improved transparency of payment status).