Economics Dictionary of ArgumentsHome
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| Cross-border payments: Cross-border payments are financial transactions where the sender and recipient are located in different countries. They involve moving money across national borders, often requiring currency exchange and coordination among multiple banks or financial intermediaries. These payments are crucial for international trade, remittances, and global investments. See also International trade, Curreny, Exchange rates._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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IMF Working Papers on Cross-Border Payments - Dictionary of Arguments
IMF II 8 Cross-Border Payments/Crypto/IMF/Reslow/Söderberg/Tsuda: There are three prevailing models for processing cross-border payments: correspondent banking, closed loops, and aggregators. Hybrid forms are also possible, for example a closed-loop system utilizing correspondent banking relationships to maintain its liquidity and manage risks. - Correspondent banking is one of the most common methods to facilitate cross-border payments. It involves two or more banks, typically located in different countries, establishing relationships to facilitate cross-border transactions. In this relationship, one bank acts as a correspondent bank and provides services to another bank, the respondent bank, sometimes with the use of intermediary banks. The respondent bank uses the correspondent bank’s services to facilitate cross-border payments for its customers. - A closed-loop system operates within a specific network, usually owned by a single company, such that the payer and the payee interact with the same entity—exemplified by Western Union, PayPal, Wise, and Revolut. The payment is processed within the network, allowing quick and secure transfer of funds between accounts. The closed-loop system can facilitate cross-border payments because it has a local presence in multiple countries or has agreements with banks or financial institutions in the countries where the payment is being sent or received. - Cross-border payments via aggregators refer to the process of PSPs using a third party, the aggregator, to process cross-border payments—exemplified by VISA, MasterCard, and Wise Platform. These payment aggregators establish a global network and do not communicate directly with end users but with PSPs, who interact with the end users. The aggregatorstypically use a correspondent banking network to gain access, but can also participate directly in local financial market infrastructures (FMIs). IMF II 14 Nexus Project: Many central banks are investigating the use of proxies, sometimes called aliases, such as phone numbers, nicknames, and email addresses, for addressing CBDC payments domestically. Cross-border addressing would be significantly more straightforward if the same proxies used domestically could be used also for cross-border payments, since they are more familiar to the users. IMF II 15 Indeed, this is addressed in the Nexus project when connecting fast payment systems, such that Nexus allows the payer to use the proxy format used in the system of the payee.(1) In the Nexus blueprint, each system shares the servicelevel description - describing, among other things, the account number format and proxy format - so the payer PSP can retrieve this information. The address book with proxies would likely need to be made available to foreign PSPs to validate the address and perform compliance checks. Initiating a cross-border CBDC payment with only a phone number would probably not meet most countries' regulatory requirements. Hence, central banks should consider using proxies for simplified addressing for the end user and options for making the full address book available to foreign PSPs for compliance checks (such as those required for AML/CFT purposes). Furthermore, the authentication of users via digital ID systems is envisioned for many CBDC systems. Having standardized digital ID frameworks across jurisdictions would certainly be beneficial in facilitating more efficient communication and messaging across borders and systems.(2) >Payment systems, >Capital flight. 1. The Nexus project is led by BISIH Singapore Centre, and in 2022, they built a working prototype to connect the test systems of three established instant payment systems (IPSs): The Eurozone's TARGET Instant Payment Settlement (TIPS) system, operated by Bank of Italy on behalf of the Eurosystem, Malaysia's Real-time Retail Payments Platform (RPP), operated by Payments Network Malaysia (PayNet), and Singapore's Fast and Secure Transfers (FAST) payment system, operated by Banking Computer Services (BCS). The BISIH Singapore Centre is now collaborating with the central banks of Indonesia, Malaysia, the Philippines, Singapore, and Thailand as they work towards connecting their domestic payment systems. For more details about Nexus, see: https://www.bis.org/about/bisih/topics/fmis/nexus.htm 2. Related to information and identity sharing is the exploration of privacy-enhancing technologies by several central banks (see, for example, Project Aurora and Project Aurum 2.0, from the BIS Innovation Hub) demonstrating that the combination of identifiers and privacy-enhancing technologies can enable both efficient identification of all parties and ensure high levels of privacy._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
IMF Working Papers IMF II IMF Working Paper André Reslow Gabriel Söderberg, Cross-Border Payments with Retail Central Bank Digital Currencies: Design and Policy Considerations IMF Fintech Note 2024/002 Washington, DC. 2024 IMF III IMF Working Papers Clemens Graf von Luckner Robin Koepke, Crypto as a Marketplace for Capital Flight. IMF Working Paper 24/133 Washington, DC. 2024 IMF IV IMF Working Papers Marco Pani Rodolfo Maino, “Could Digital Currencies Lead to the Disappearance of Cash from the Market? Insights from a ’Merchant-Customer’ Model.” IMF Working Paper WP/25/56 Washington, DC. 2025 |
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> Counter arguments against IMF Working Papers
> Counter arguments in relation to Cross-Border Payments
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