Faster, cheaper, and more transparent cross-border payment services have “the potential to improve many lives by supporting economic growth, international trade, global development, and financial inclusion.” This, according to an update shared by the International Monetary Fund (IMF).
The Group of Twenty has prioritized such progress, the IMF team noted.
That’s because the financial links “between countries, particularly between emerging market and developing economies, face several challenges that must be addressed, including high costs and inconsistent charges depending on the countries being linked,” as explored in a new paper prepared as part of the payments work with the G20.
The IMF also mentioned that the global average cost of sending $200 “from one country to another is about $12.50 in the first quarter of 2023, or 6.25 percent,” according to the World Bank’s Remittance Prices Worldwide database.
The IMF update added that the G20 have “set a target, reaffirming the United Nations Sustainable Development Goal, of a global average cost for sending a $200 remittance of no more than 3 percent by 2030, with no corridors higher than 5 percent.”
However, the IMF pointed out that some costs “are many times higher than this target. Fees exceed 50 percent for funds sent from Türkiye to neighboring Bulgaria, for example.”
High fees, especially bank-to-bank transfers, “are a main driver of the high costs for corridors between emerging market and developing economies. Such bank fees tend to be much lower for transfers originating in advanced economies where foreign-exchange margins can be 50 percent or more of the cost in some corridors.”
The Financial Stability Board acknowledged in a recent report “that progress under the roadmap to enhance cross-border payments will be needed to meet the targets set across the wholesale, retail, and remittances market segments.”
To help reduce costs and address challenges with cross-border payments, international organizations such as the IMF and World Bank will need “to play a key role by sharing best practices through technical assistance for member countries.”
Technical assistance can help because, “while the targets are set at a global level, they require coordinated and customized assistance at the country level to address specific challenges.”
The IMF shares its knowledge “with government institutions such as finance ministries and central banks through hands-on advice, training, and peer-to-peer learning.”
Their technical assistance is part of capacity development, which is “a core mandate that accounts for nearly a third of the IMF budget.”
They will focus in coming years “on improving access to payment systems, extending and aligning operating hours, interlinking of payment systems, combating money laundering and the financing of terrorism, and harmonizing payment systems by adopting the global and open standard for exchanging financial information, known as ISO 20022.”
They will also collaborate with the World Bank “at the country and project level.”