Cross-border payments system interoperability has long been cited as a key development towards seamless transactions across systems and jurisdictions. But in recent years, a variety of both public and private sector initiatives are aiming to make further progress towards that goal.

Although some successes have been published, two critical characteristics required to offer extensive scalability are often overlooked. First of which is the non-transitive nature of bilateral solutions – if interoperability between System A and System B is achieved and interoperability between System B and System C is achieved, this does not imply interoperability between System A and System C. Second in this is the need for supporting liquidity arrangements – both characteristics which, although often presented as the next logical step, are rarely elaborated upon.

If interoperability between payments systems is to be rolled out at scale, it needs to fully achieve the ambitions set out in the G20 roadmap for enhancing cross-border payments. Therefore, there is a case to be made for establishing a new common platform that: first, creates a foundational jurisdictional level, designed with accessibility and the potential for a truly global reach in mind; second, is underpinned by an agile technical infrastructure that leverages the latest standards, for payments, messages, application programming interfaces and technological advancements; and third, is overlayed with a fit-for-purpose standard message and workflow where final clearing and atomic settlement of the fund flows is achieved within the rulebook of the common platforms. Such a platform would truly allow for the interlinking of payments systems across borders.

With support from central banks, a hybrid model would emerge whereby through the use of ‘host banks’ (regulated institutions that provide liquidity in their domestic currencies to the platform and offer access to their local payments services to other participants), a wide range of financial institutions would be able to hold balances in currencies where they do not have a local presence. Participation in the common platform would allow these institutions to instruct payment instructions in each jurisdiction in which they have partnered with a host bank.

Central banks can support this process by providing accounting arrangements that allow a regulated payment service to execute the transfer across the common platform of funds held – by the respective host banks – at the central bank. Combining the ability to directly instruct a domestic payment with the movement of funds into a single transaction across a single interface would offer a strong and scalable alternative to the reliance on the traditional correspondent chain. Funds are held at the central banks and the technical accounts’ balances are maintained within the central system. This, therefore, changes the speed of cross-border payments from days to seconds.

It is also crucial to recognise that regulatory interoperability is a vital element in enabling other types of interoperability. Co-operation and coordination among regulators – alongside consistent standards across jurisdictions – lay the groundwork for reduced complexity, harmonised oversight frameworks and smoother cross-border transactions. This alignment, combined with effective public-private collaboration, not only supports practical innovation, healthy competition among diverse market participants but also contributes to a robust, well-functioning, safe and efficient ecosystem for cross-border payments.

The global migration to the International Organisation of Standardisation’s ISO20022 has been heralded as transformative in this regard. However, local flavours of implementation of this standard, each with their own nuances, have already emerged, leaving room for a private sector initiative to harmonise and coordinate the bridging of these differences. This would create fully transparent liquidity flows, optimising liquidity velocity while vastly reducing the complexity of the end-to-end reconciliation of cross-border payments.

This is the approach we have taken at RTGS.global – an approach which aims to achieve a common platform that the market can adopt to reach payments systems on a truly global scale.

Financial institutions will continue to invest in payments technology and systems. But introducing a new standard way of working across a shared platform will not only boost efficiency, but encompasses both breadth, in supporting a wide range of eligible currencies, and depth, with direct participation from a large number of financial institutions.

If the choice is thoughtfully considered, there is no requirement for a ‘big bang’ introduction. In collaboration with the banking community and the wider financial ecosystem, a phased and controlled approach is feasible (with a focus on regional growth and/or on certain business use cases first). If chosen well, a payment flow settled directly between two institutions using a standardised workflow will further support regulatory compliance, strengthen anti-money laundering/know-your-customer checks and enhance fraud and financial crime detection without any need to compromise on data privacy and security. Building block 17 (‘considering the feasibility of new multilateral platforms and arrangements for cross-border payments’) of the G20 roadmap for enhancing cross-border payments, provides a good set of guidelines for – and highlights potential pitfalls of – this approach.

Introducing such a platform would represent a monumental step forward towards universal interoperability between payments systems and other key infrastructures in the financial market ecosystem. Once matured, it would be another major development in the move towards programmable money, moving from certainty of payment to the certainty of getting paid, impacting how we transact, do business and live in a global world.