As per a recent report ,
81 % of cross-border payment transactions involved remittances
Editor ’ s note : Survey distribution , analysis and results were compiled by the author . The views and results expressed are solely those of the author and are not meant to represent the opinions of ACAMS .
As per a recent report ,
81 % of cross-border payment transactions involved remittances
The cross-border payments market was estimated to be worth $ 150 trillion in 2017 and is slated to increase to $ 250 trillion by 2027 . 1 These cross-border payments constitute wholesale cross-border payment transactions as well as retail cross-border payments . As per a recent report , 81 % of cross-border payment transactions involved remittances ( i . e ., money being sent to support friends and families abroad ). 2 With this size and with global economies becoming increasingly connected , it is important to have a fast , secure and efficient cross-border payment system .
Various cross-border payment systems are used across the globe , which ensures that financial institutions ( FIs ) worldwide exchange cross-border-related information securely along with the electronic messages related to these crossborder transactions . Clearing House Interbank Payments System ( CHIPS ), Fedwire , Single Euro Payments Area ( SEPA ), Cross-Border Interbank Payment System ( CIPS ) and Society for Worldwide Interbank Financial Telecommunication ( SWIFT ) are some of the major cross-border payments systems used globally . SWIFT is the most prominent among these systems , which handles 48 % by volume and 56 % by value of all cross-border payments . 3
SWIFT text messaging standards
SWIFT , being a synonym for cross-border payment transactions , started its journey in the 1970s by replacing Telex technology . It revolutionized how different parties of the financial services industry connected and exchanged payment-related information for the execution and settlement of crossborder financial transactions . However , with the increased integration of the global financial system , real-time payments started becoming a reality . Payment systems like SWIFT also started facing challenges , and gradually , the messaging system became more ineffective for global institutions due to its high cost , slow speed and lack of transparency in electronic messages . There were also issues due to fragmented messaging standards , which resulted in data truncation and incorrect processing of payment transactions .
This fragmentation resulted in the absence of complete transaction information in the messaging formats , adversely impacting the identification of financial crime risk ( i . e ., impeding the sanctions screening process , making it difficult to investigate sanctions alerts and matches ). This ultimately resulted in greater exposure to sanctions risk for the FIs .
The ISO 20022 payment standard
To address the above limitations , the industry decided to replace the existing text messaging standard with the new payment standard , also known as ISO 20022 or the MX messaging format standard . This new standard is based on the extensible markup language ( XML ) rule . The new payment standard will be a paradigm shift in the cross-border payment industry and will trigger the new progressive world order by further standardizing the messaging formats and ensuring a more cohesive and seamless global trade environment .
The new ISO 20022 payment standard is expected to bring in greater transparency and increased efficiency in the messaging formats , which will ensure the coverage of all the relevant financial transaction information and ultimately reduce operational frictions , facilitate faster payment execution , lower cost and enhance the detection and mitigation of sanctions / financial crime compliance risks .
ACAMS Today | December 2023 – February 2024 39