Correspondent banks, which were first cre-

atedmore than 100 years ago, are nowdevelop- ing ways to modernise some of their systems. That work is vital to support this complex net- work that keeps the world economy moving while meeting the demands of an always-on world.

There are a variety of efforts to augment this

systemwith today’s newest technologies. One of them is real-time payments, which use more sophisticated messaging to enable transfers of money that are nearly instantaneous and can happen at any time. These systems have prolifer- atedworldwide over the past decade. Additionally, cryptocurrency has become a

buzzytrend inpaymentinfrastructure.Themost useful ones for buying and selling goods are pri- vate companies’ stablecoins and governments’ central bank digital currencies, or CBDCs, since they maintain consistent values. Because these coins arebornonline, itmaybepossible forthem to move internationally more easily than older forms of money. They could also give more peo- ple – especially those without bank accounts – the ability to spend and save digitalmoney. Last, a newer concept called open banking

makes it much easier for customers to move theirmoney betweenfinancial institutions and access loans by letting themsharemoreof their data – if they choose – with their banks and lenders.

Newpossibilities Thesethreeconcepts–real-timepayments,crypto and open banking – will expand the possibilities for how consumers and merchants use money. These trends buildondecades ofwork toimprove the payment experience, first by introducing charge cards in the 1950s, then adding in more sophisticated technologies to create contactless cardsand cashierless-checkout stores. There is the possibility that these new pay-

ment systemswillone day create a tech-based cor- respondent banking network that’s faster and more reliable. It’s unlikely to replace correspond- ent banks since they are so broadly used and are particularly suitable for largerpayments.But this new systemwould provide a new, powerful tool to move money overseas, especially for smaller transactions. That way, no matter where you’re located, it could be as if you live right by the pay- ment version of an international airport, with direct flights to just aboutanywhere. The vision would be a fully interconnected world that would allow you to send or receive

April/May 2021

money from anywhere in any currency at any time and in the blink of an eye. The same app you use to send money to your friend down the street could be used to forward remittances to your family internationally. This idea is a huge step forward in creating a digital economy that works for everybody. The future of payments is upon us, but there

are several hurdles to overcome. For example, a current limitation of real-time payments ismost of these networks are built only for specific countries, sodon’twork for cross-border transac- tions. CBDCs, meanwhile, are still in their infancy, so mainstream international adoption of these government-backed currencies will likely take years. We have the ability to bring about a better

future. Creating new universal standards for privacy and data storage, cyber security and cloud networks would allow all these systems to easily connect. Work can be done with regu- lators to hash out compliance requirements across nations – such asmoney laundering and sanctions processes – to streamline the rollout of these platforms. Work must be done to pro- vide liquidity, particularly into smaller mar- kets, to ensure these faster systems can operate properly and to cut down on foreign exchange costs overall. Above all, trust is the most important ingre-

dient. Trust must be the bedrock of every new technology and every new service, so people are encouraged toembrace these changes. All of this work should keep us busy, build-

ing thesenewconnections, solidifying themand ensuring their safety and efficiency.

Behind the scenes The time, not that long ago, when social secu- rity cheques were the norm, hints at howmuch can change. Shifts in banking and consumer behaviour typically happen over years. Ultimately, people who aren’t busy building new payment networks probably won’t notice what’s going on behind the scenes. But someday, you may find it a little easier

to sendmoney – or funds you requested froma business partner may arrive faster than antici- pated. Perhaps your town becomes a little more prosperous. And that’s the goal, isn’t it? That these

improvements are solid and progressive, so you’ll simply take themfor granted.■

MichaelMiebachistheCEOofMastercard 43


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