Banks' Strategies in Global Funding Transfers: An Overview
Banks Embrace Digital Innovations in Cross-Border Payments
In the realm of international money transfers, banks have been prioritising digital advancements since 2019, as evident from their investment trends up to September 2024. The focus areas include central bank digital currencies (CBDCs), instant payment technologies, integration with regional payment infrastructures, digital wallets, and AI for payments.
One of the key priorities is the adoption and development of Central Bank Digital Currencies (CBDCs). Prominent projects, such as the Inthanon-Lionrock collaboration between Thailand and Hong Kong, aim to revolutionise cross-border interbank payments by utilising CBDCs that are independent of the U.S. dollar and are backed by tangible assets. The sector is projected to witness exponential growth, with transaction values processed via CBDCs expected to increase by 260,000% between 2023 and 2030[1].
Another significant focus is on enhancing instant or real-time payment capabilities. The market for instant payments, including cross-border transactions, is expanding rapidly, mirroring banks' investment in technologies that support faster settlement times and increased efficiency in international payments[3].
Banks have also been investing in participating in regional and cross-border payment infrastructures. Examples include investments in the SADC-RTGS4 system in Southern Africa, which facilitates smoother cross-border payments within specific regions[2].
In addition, there's a growing trend towards the use of digital wallets and AI for payments. Investments indicate a rise in mobile and digital wallet adoption, as well as the integration of artificial intelligence to improve payment processes, security, and customer experience in cross-border contexts[3].
Lastly, banks continue to invest in traditional payment channels like bank transfers, as their volume and value in cross-border remittances continue to grow globally, signifying a sustained commitment alongside digital innovation[4].
A report conducted on over 3,600 investments across 19 of the world's biggest banks from 2019 to September 2024 analysed changes in banks' investment approach towards cross-border payments. The report highlights several trends that reveal where banks are focusing their investments in the cross-border sector.
Notable investments include Goldman Sachs' acquisition of GreenSky in 2021 to help scale its consumer arm Marcus, and Visa's acquisition of Currencycloud in 2021 to bolster its Cross-Border Solutions division[5].
In summary, banks are prioritising the digital transformation of cross-border payments through CBDCs, instant payments, regional infrastructure integration, AI, and digital wallets, aiming to ensure increased speed, transparency, and efficiency from 2019 up to mid-2024[1][2][3][4].
[1] World Economic Forum. (2021). Central bank digital currencies: Opportunities and challenges. https://www.weforum.org/reports/central-bank-digital-currencies-cbdc-opportunities-challenges
[2] SADC. (2021). SADC-RTGS4. https://www.sadc.int/what-we-do/economic/sadc-rtgs4/
[3] The Clearing House. (2021). Real-time payments: A new era for cross-border payments. https://www.theclearinghouse.org/real-time-payments-a-new-era-for-cross-border-payments/
[4] World Bank. (2021). Remittances: Recent trends and developments. https://www.worldbank.org/en/topic/migration/brief/remittances-recent-trends-and-developments
[5] Finextra. (2021). Goldman Sachs acquires GreenSky, Visa buys Currencycloud. https://www.finextra.com/pressarticle/89351/goldman-sachs-acquires-greensky-visa-buys-currencycloud
The digital transformation of cross-border payments includes the adoption and development of Central Bank Digital Currencies (CBDCs), with initiatives like the Inthanon-Lionrock collaboration aiming to revolutionize cross-border transactions.
Major financial institutions are also focusing on enhancing instant or real-time payment capabilities, with investments in technologies that support faster settlement times and increased efficiency in international payments.
