A boundary-free global payments market, in which international payments become as cheap, easy and standard as domestic ones, took a step closer to reality recently when 21 leading banks, clearing houses and payment service providers based in Europe, the US, Canada, Brazil and South Africa signed up to the International Payments Framework Association (IPFA).
By joining the IPFA, members agree to adhere to and apply a uniform set of business rules, standards and operating procedures to cross-border payments. Two of the association’s founding members, the Federal Reserve Bank in Atlanta, US, and Equens in Europe have begun processing US dollar and euro payments between the US and Europe.
The main thrust behind the IPFA is to create an integrated, standardised payments market capable of handling larger volumes of transactions at lower cost. As single euro payments area (SEPA) transactions rise, processing payments outside SEPA will become comparatively increasingly expensive. Given that the SEPA infrastructure is now in place and investments are being made in this mediating technology, why shouldn’t payment providers go ahead and start connecting with partners abroad and overseas to start leveraging on a global scale?
The idea behind the IPFA is to create seamless reach around the world starting with Europe and the US, where the National Automated Clearing House Association (NACHA) is also breaking down the walls between national payment systems by adopting, for example, the ISO 20022 standard used by SEPA for financial messaging.
Over the next year, IPFA members are planning to bring the currencies of Brazil, Canada, Mexico and South Africa into the framework. Equens, for example, is already talking to financial institutions in Canada, South Africa and South America, and is actively looking for partners in Asia and Australia.
In terms of structure, the IPFA’s board comprises members of six banking institutions and three clearing houses. The elected chairman of the board is Arthur Cousins of Standard Bank of South Africa, who is responsible for steering the direction of the association.
Despite all the automation and improvements that digital banking has the potential to achieve, customers and their needs still form the very core of the banking sector.
Politicians have united in urging the Reserve Bank of Australia to lend its backing to the digital currency by officially recognising it.
In order to survive, banks must get ready for an open application programming interface-led economy and develop superior value propositions for their customers.
The banking industry will meet the challenge of the new era introduced by Europe’s Payment Services Directive, but it is up to its individual members to determine whether they sink or swim.