The US Federal Reserve in Washington, DC.
Over the past week, the payments industry hosted two major events in the United States that together represent the most important opportunity to gauge the pulse of cross-border payments in the country this year.
The first, Money20/20, is a large trade event held in Las Vegas, where thousands of delegates from the fintech, payments and beyond industries come together to network and discuss the latest trends. However, the second, Economics of Payments XII, is a highly selective meeting of academics organized annually by one of the world’s central banks and held this year at the US Federal Reserve in Washington DC.
I had the pleasure of attending both events (alongside colleagues at my company FXC Intelligence) and while the events are very different, the learnings from both combine to provide an insightful picture of the state payments landscape -United, particularly in terms of opportunities for cross transactions. -border space.
At the macro level, the key sentiment is that we are currently in a period of change and growth in payments in the United States, which is creating powerful opportunities for the sector. Nationally, this year saw the launch of real-time payments system FedNow, while The Clearing House’s own RTP system saw its highest usage ever, passing 64 million transactions in Q3 2023 with a combined volume of $34 billion.
However, the United States has also seen increased interest in cross-border payments, as opportunities to expand beyond the country become increasingly evident for a wide range of business types.
The rise of cross-border payment opportunities in the United States
With such a strong domestic economy, the United States has traditionally been a relatively immature cross-border payments market, with low levels of currency knowledge among the general public compared to similar economies in Europe.
However, there are signs that this is starting to change. At Money20/20, companies with large cross-border offerings dominated many booths, and financial press interest in the space was significantly higher than in previous years. Cross-border business networking was also particularly strong this year, as companies were there to do business and create opportunities, rather than just to be seen.
Meanwhile, on the central bank side, the Federal Reserve continues to explore ways to improve the interconnectivity of its financial system. Michael S. Barr, vice chairman for oversight of the Federal Reserve Board of Governors, emphasized that the Fed has not made any decisions on issuing a central bank digital currency (CBDC), e.g. , but highlighted the importance of national and international decision-making on the subject, which continues to be the subject of extensive research and modeling.
Lessons and opportunities in Latin America
Unsurprisingly, the increased focus on cross-border transactions in the United States is accompanied by an increased focus on Latin America, the region that receives the largest number of payment flows from the country.
At the Payments Economics Conference, Brazil’s instant payment system Pix was the subject of two separate research papers, both providing insight into its benefits for financial inclusion and improving the good -be. This has potential lessons for other countries, including the United States, despite the significant difference in the composition of payments and the greater role of private operators.
At the same time, there is also an increase in activity from players in the region, who are increasingly putting down roots in the United States by taking advantage of the rapidly evolving cross-border payments landscape in Latin America.
Money20/20 saw a greater presence of operators based in or sourcing largely from Latin America than has been the case in previous years, and the region was the focus of discussion in several discussions.
Technologies supporting cross-border payments in the United States
Although there are years when fintech conferences are dominated by a single topic of conversation, this year was very nuanced, which is a welcome reflection of a maturing industry. At Money20/20, artificial intelligence was a topic of discussion, but largely in the context of real practical applications, rather than high-level discussions that typically reflect an overly publicized topic.
Cryptocurrencies, meanwhile, were largely absent from the conference, although some stablecoin players have begun to gain strength thanks to the unique utility of their offerings, rather than focusing on crypto for crypto’s sake. crypto.
Here, there is a growing divide between the stablecoins the payments industry will work with – those backed entirely by audited, short-term, liquid assets located in the United States – and those they will not – those located abroad with less regulatory oversight and less liquidity. the liquidity that supports them. Companies working with or supplying the former were present at Money20/20, while there was no record of the latter.
The Payments Economics Conference, meanwhile, delved heavily into this topic, with academics presenting a number of papers on stablecoins to explore their usefulness, challenges and potential danger to the system financial as a whole in the event of poor management. There is still considerable skepticism within the central banking community about their suitability for the financial system, but there is a clear recognition here that there are marked differences between types of stablecoins in terms of their safe use in the financial system. within a broader economic system. It was also recognized that they were here to stay in one form or another.
Promote transparency
The US payments system is evolving as it seeks to build on its existing systems amid growing interest in the cross-border space. However, one area where interest is becoming particularly pronounced is that of transparency. Traditionally, the cross-border payments space has been very opaque, with consumers subject to expensive services and sometimes insufficient understanding of component costs, particularly in the United States.
However, there is growing recognition that this needs to change, and this year the sector as a whole took a major step forward with the publication of the first data towards the goals of the G20 Financial Stability Board. Powered in part by my own company’s data, this finding provides for the first time a measure of how G20 countries are performing against a number of cross-border payments measures related to cost and speed, and indicates that There is still some way to go if the goals are to be achieved by 2027.
This has had a profound impact on the industry on many levels. While the G20 goals and the importance of transparency were the subject of several discussions at the Payments Economy Conference, this also resulted in an increased discussion on transparency at Money20/20.
From networking conversations to high-level discussions, transparency was a major watchword at Money20/20 this year, with a wide range of stakeholders citing its importance to their ongoing operations. Importantly, this is also expected to heavily influence future discussions on cross-border payments, particularly in the United States, as the space evolves.
Compared to some markets, the U.S. cross-border industry remains relatively underdeveloped, but it is expanding and new opportunities are quickly emerging. In a global financial system where change is essential, it represents a powerful player in this area.