G20’s cross-border payments plan to miss 2027 deadline

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According to the G20’s Financial Stability Board (FSB), global financial authorities will not meet the goals originally set in 2021 which include cutting the global average cost of a retail payment to no more than 1% of its value and for 75% of wholesale and retail payments to be credited within an hour of initiation.

“It’s becoming clear that the (G20) targets are not going to be hit by 2027,” said FSB deputy secretary general Martin Moloney, as quoted by Reuters.

He cited the large number of countries involved as well as the challenges of overhauling existing infrastructure as two causes of the delay.

Moloney also said that the G20 has two choices – to extend the original deadline or to come up with an entirely new one.

Payment processors and other fintechs have unsurprisingly reacted with disappointment, blaming a combination of outdated technology, inflexible regulations and dominant legacy banks.

According to David Patrick, head of payments strategy at RedCompass Labs, one of the issues that needs to be addressed is the conflict in rules and regulations in different jurisdictions.

“Each jurisdiction imposes its own rules on data protection, anti-money laundering, and capital movement, often with limited interoperability, which adds friction instead of efficiency,” said Patrick. “National regulators play an essential role in maintaining trust and stability, but their mandates are domestic, making global coordination difficult.

“Greater regulatory alignment, not simply more regulation, is required if we are to reduce costs and improve efficiency. Governments should focus on harmonized standards and open access, letting technology and competition drive innovation, rather than constraining them through conflicting national rules,” he added.

According to Mike Walters, CEO of payment technology vendor Form3, a complete overhaul of payments infrastructure is needed,.

“The industry is still dependent on correspondent-bank networks built in the 1970s. These are costly, opaque and full of friction, requiring banks around the world must hold multiple nostro accounts, bear liquidity costs, and patch legacy cores with “band-aids” just so they can talk to each other. As a result, cross-border payments are still expensive,” said Walters.

“If the G-20 wants to reduce costs, the next move must be to harmonise regulation, mandate real-time settlement across jurisdictions, and perhaps most importantly, build open and resilient cross-border rails. We need infrastructure that can scale safely, 24/7, without legacy single points of failure,” added Walters.

Meanwhile, Laurent Descout, CEO and co-founder at digital bank Neo, has cited the oligopoly of incumbent banks as the problem. “For their part, fintechs have driven a significant reduction in cross-border fees and FX spreads since 2011.

“However, the reality is that a small number of major banks continue to dominate the correspondent banking business, creating an oligopoly that limits competition and causes bottlenecks.”

There is hope, though, said Descout, in new message formats such as ISO20022 and onchain netowkrs that have the potential to reduce cost on an “industrial scale”.

“What is needed now is adoption across supply chains,” said Descout.