The future of cross-border wholesale payments: Mobilising central bank money across borders

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Abstract: Large-value cross-border payments constitute the life-blood of international trade and commerce and are thus crucial to national economies. This paper explores this high-value payment ecosystem, which has become more complex and expensive following the prudential regulatory reform rolled out in response to the global financial crisis. Recent technology innovations, in particular the emergence of blockchain and distributed ledger technology, have led to the creation of a parallel system of value transfers based on crypto currencies. The combination of cloud computing, software innovations and the increased use of application programming interfaces has enabled the creation of new business and technology models that are innovating this space. On top of this, the arrival of central bank digital currencies may have the potential to support cross-border payments, both retail and wholesale. This paper explores how far these developments can support a better system for large-value cross-border payments, providing a number of examples of real-world business approaches. A critical lens is applied to gaps outside of the technology field, such as central bank policies and liquidity management, which will need to be closed before true innovation can occur at scale.

Keywords: cross-border wholesale payments; correspondent banking; real-time gross settlement system (RTGS); central bank digital currency (CBDC); distributed ledger technology (DLT); high-quality liquid assets

Ruth Wandhöfer is Managing Director and Head of Global Regulatory & Market Strategy, Citibank. She chairs several influential industry bodies and is a member of the European Commission Payment Systems Market Expert Group and founding member of the Global Blockchain Business Alliance. She is a FinTech Fellow at Imperial College Business School and fellow lecturer at Queen Mary London School of Law. A 2015 recipient of the ‘Women in Banking and Finance Award for Achievement’ and named on the 2016 global ‘Women in Fintech Powerlist’ of Innovate Finance, she has written two books: EU Payments Integration (2010) and Transaction Banking and the Impact of Regulatory Change (2014).