Title Page
Exploring multilateral platforms for cross-border payments
January 2023
Copyright Page
This publication is available on the BIS website (www.bis.org).
©Bank for International Settlements 2023. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated.
The views expressed in this paper are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ISBN 978-92-9259-625-5 (online)
Contents
Executive summary
1. Introduction
2. The role of multilateral platforms
2.1 Multilateral platforms in the taxonomy of cross-border payments
2.2 Key design choices and related considerations
2.3 Effects of multilateral platforms on frictions
3. Stocktake of multilateral platforms
4. Risks, barriers and challenges
4.1 Legal risk
4.2 Operational risk
4.3 Illicit finance risks
4.4 FX and liquidity risk
4.5 General business risk
5. Considerations for increasing the role of multilateral platforms
5.1 General considerations
5.2 Considerations specific to the growth approach
5.3 Considerations specific to the greenfield approach
5.4 Potential roles for the public sector
6. Conclusion
References
Appendix 1: Key interdependencies with other building blocks
Appendix 2: Composition of the Future of Payments Working Group (FoP)
Appendix 3: Acronyms and abbreviations
Executive summary
This report provides an assessment of whether and how multilateral platforms could bring meaningful improvements to the cross-border payments ecosystem. It was written by the Bank for International Settlements' Committee on Payments and Market Infrastructures (CPMI) in collaboration with the BIS Innovation Hub, the International Monetary Fund (IMF) and the World Bank.1 The report analyses the potential costs and benefits of these platforms and how they might alleviate some of the cross-border payment frictions. It also evaluates the risks, barriers and challenges to establishing multilateral platforms and explores two paths for their evolution. The analysis is based on a stocktake, conducted by the CPMI, of existing and potential multilateral platforms as well as bilateral discussions with existing platform operators.
A multilateral platform is a payment system for cross-border payments that is multi-jurisdictional by design. It can substitute for or operate alongside traditional correspondent banking relationships or bilateral interlinking of domestic payment infrastructures. A multilateral platform can potentially shorten transaction chains by allowing participants in different jurisdictions to send or receive payments directly instead of via multiple intermediaries. Depending on its design, a platform can offer extended operating hours to meet the requirements of participants in different time zones and ease compliance checks related to anti-money laundering and combating the financing of terrorism (AML/CFT). Built as new, it can also reduce dependencies on legacy systems by implementing the latest technology and payment message standards. To the extent a multilateral platform is able to mitigate these underlying frictions, it could reduce the costs and increase the safety, speed and transparency of cross-border payments.
Multilateral platforms could enhance cross-border payments but often involve more complicated legal and operational issues relative to domestic payment systems. Any decision to increase the role of multilateral platforms should weigh all relevant trade-offs, risks and benefits relative to other cross-border arrangements such as correspondent banking, not merely the added risks relative to domestic systems. These considerations vary depending on the current state of cross-border payment arrangements in a specific geographical region or for a specific payment system function, as well as on the purpose and chosen approach for increasing the role of multilateral platforms. The actual improvements that a potential platform can bring to the cross-border payments ecosystem will, of course, depend on its concrete design. Hence, this report can only offer some high-level considerations, without pre-empting potential future considerations on individual business cases.
This report explores two conceptual implementation approaches: the growth approach and the greenfield approach. The growth approach involves expanding existing multilateral platforms to additional jurisdictions, currencies and participants (including by extending access to foreign participants and interlinking with domestic systems and other platforms). This option could be based on existing institutional arrangements but may nevertheless require additional public-private sector involvement and coordination. The greenfield approach involves building a new, potentially global infrastructure for cross-border payments. This option could foster greater alignment of certain aspects of cross-border payments but may entail complex governance discussions and cooperative oversight arrangements as well as careful balancing of the roles of public and private sector stakeholders.
Policymakers have different options to consider as they analyse the potential development and implementation of multilateral platforms. Any evaluation should carefully consider the trade-offs of multilateral platforms and account for the evolving nature of the cross-border payments market. To this end, possible further measures could entail efforts by regional bodies, operators and/or international organisations to realise the potential of multilateral platforms. Taking advantage of the momentum generated by the G20 cross-border payments programme, payment system operators and authorities contemplating the expansion or establishment of multilateral platforms can use this analysis as a basis for evaluating the best approach for their specific circumstances. Such preparatory steps could allow relevant stakeholders to gain a sound basis from which to plan and assess future actions.
The report forms a part of the G20 cross-border payments programme and presents the output of building block 17 action 2. In action 1, the CPMI Future of Payments working group (FoP) conducted a stocktake of existing and potential multilateral platforms and evaluated their risks and benefits. In action 2, the FoP performed a cost/benefit and feasibility analysis of one or more new multilateral platforms. The action 1 stocktake was carried out as a part of a larger survey on cross-border payments, in which the CPMI asked central banks about existing and planned multilateral platforms in their jurisdictions and their views on how such platforms might be able to address the frictions of cross-border payments, see also CPMI (2022a).
