- Low-value cross-border payments are important for global trade and financial inclusion.
- The market for low-value payments is valued at $10.6tn and expected to grow in the upcoming years.
The global low-value payments market has suffered from opaque transaction costs, limited traceability, and long wait times for payments to complete. These difficulties have made it hard for people to make international purchases and send money to family members, which has contributed to global inequality and hindered the growth of SMEs and international trade. Despite these challenges, the low-value payments market is sized at $10.6tn, with consumer-to-business flows accounting for approximately $1.4tn and remittances valued at $701bn in 2020.
Financial inclusion remains a key priority for society, with a significant percentage of the population in developing nations outside of the conventional banking system.
Transparency and Collaboration are Crucial:
To achieve more efficient, reliable, and fast low-value payments, a focus on transparency is critical. This means pre-agreed transaction costs that are communicated to parties at the outset. While innovation in the space is a welcome step, banks’ role in guaranteeing traceable, secure payments across the world cannot be underestimated.
The global financial community must continue to collaborate to enhance the solutions we already have in place and help develop new offerings designed to unlock the potential of low-value cross-border payments. Addressing the challenges in executing these payments internationally is a crucial step to establishing a more inclusive global economy.
Ripple, IOTA, and Stellar Lumen in line to work with SWIFT under ISO 20022
Ripple, IOTA, and Stellar Lumen are reportedly in line to work with SWIFT under the ISO 20022 regulation, a single standardization approach meant to be used by all financial standards initiatives. Market infrastructures such as The Clearing House, the Federal Reserve, the Bank of England, and the Nigeria Interbank Settlement System (NIBSS) have all declared their plans to migrate to ISO 20022 between 2022 and 2025. Ripple’s ISO 20022 membership will allow customers to utilize RippleNet to access a network of global financial institutions and connect to one standardized API for all counterparty connections.
U.S. Federal Reserve and Other Cryptocurrencies Plan to Move into ISO 20022 System
The U.S. Federal Reserve plans to move into the ISO 20022 system by November 2023, with XDC, ALGO, HBAR, QNT, MIOTA, and ADA rumored to be compliant with ISO 20022. Cryptocurrencies do not have official codes under ISO 4217, but they use unofficial ISO codes. Ripple has a technical edge over SWIFT as its RippleNet platform is already compatible with cross-border payments and enables users to instantly access their money. Transactions are settled in as little as four seconds, and the platform addresses the challenges of cost and speed.
In summary, low-value cross-border payments are essential for global trade and financial inclusion. While challenges exist, the market for low-value payments is significant, and transparency and collaboration are crucial to achieving efficient, reliable, and fast low-value payments. The migration to ISO 20022 is a welcome step in the right direction, with Ripple, IOTA, and Stellar Lumen reportedly in line to work with SWIFT under the new system.