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#6974

The past five years have brought increasing change to the world of cross-border payments. The trusted and tested correspondent banking approach has encountered challenges from emerging alternative solutions and new players upending some of the industry’s fundamentals. The nature and direction of these changes, however, remains unclear in many cases.

We strongly believe that decentralization is a key-factor in building a better society for everyone. By accelerating the world transition to digital assets, we are helping the world to move into this direction.

International payments have long served as the engine enabling cross-border trade and investment, and have been instrumental in the emergence of today’s global economy. An extensive list of requirements —a ubiquitous network of trusted parties spanning the entire world, substantial regulatory and technical infrastruc- ture, and a mandate for ample liquidity— have historically made banks the natural “owners” of the cross-border market (augmented by some specialized firms active mostly in tertiary remittance markets).

Margins have traditionally been robust cross-border; and occasional price pressures have weighed on margins, but not to the extent of requiring radical cost transformation observed in domestic payments. Although cross-border flows represent only one-sixth of total transaction values, international payments revenues total up to $200 billion globally, split roughly evenly between transaction fees and foreign exchange (FX) revenues. This equates to 27 percent of global transaction revenues and is increasing by 6 percent annually.

Today, the global cross-border payment landscape is at the center of a number of trends that could fundamentally change competitive dynamics: increasing pressure from emerging technologies (including distributed ledger technology—DLT—and card and network innovations); shifting regulatory and sanctions frameworks; accelerating international commerce (retail as well as corporate); and, especially, changing customer demands. In addition,firms new to the cross-border market, such as TransferWise, Alibaba and Amazon, are increasing competitive pressure on incumbents.