Central banks will ask world leaders to back a "roadmap" for cutting the cost of cross-border payments, the Bank for International Settlements said on Sunday. The BIS wants Group of Twenty (G20) leaders to get behind the plan, which is being drawn up regulators, central banks and treasury officials from across the world and will lay out steps to improve a payments system hindered by high costs.
Political will is needed to create conditions for cheaper cross-border payments that are properly regulated at a time when international "correspondent" banks are pulling out from aiding such payments for local lenders. Cross-border payments, critical for some emerging economies that depend on remittances sent by migrants abroad, are hampered by low speeds, high costs and cumbersome processes.
The roadmap will look at current costs, sticking points and risks in payments and pinpoint how the private and public sectors can tackle them, the Basel-based BIS, an umbrella group for central banks, said. In a rare move, the BIS devoted its quarterly review to payments in a sign of how Facebook's plans to launch its Libra cryptocurrency has forced central banks to look beyond their wholesale payment networks to changes in the retail sector.
Facebook's planned expansion to retail payments has focussed regulatory concern over the role of Big Tech in financial services, stoking debate over who will control money in the future. As technological changes sweep through the domestic and cross-border payments sectors, central banks must accelerate work to guarantee that new services run safely and efficiently, the BIS said.
"Central banks have a core role in payment systems," said BIS General Manager Agustín Carstens. "The changes under way require them to step up and play a more significant part in improving the safety and efficiency of these systems."
Peer-to-peer systems that cut out middlemen are the most transformative way of improving payments, the BIS said. These often use blockchain-based systems. Proponents say blockchain could wipe out the need for middlemen such as banks in payments. But trusted intermediaries like central banks are still crucial, the BIS said.
"Money and payment systems are founded on trust in the currency - whether cash or digital - and this trust is something that only the central bank can ensure," it wrote.
Still, whether central banks can exercise control over decentralised payment methods like bitcoin, which transcend borders and have proved tricky to regulate, is unclear. Central bank digital currencies (CBDCs) - digital money issued and governed by a central bank - could provide a safe and easy means of peer-to-peer payments, the BIS wrote.
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