(AGENPARL) – Tue 06 May 2025 Invisible yet essential: the contribution of cross-border payments
to a better world and a safer financial system
Keynote speech by Fabio Panetta*
Governor of Banca d’Italia
Banca d’Italia side event on ‘Cross-border payment rails:
from infrastructure roll-out to a smooth customer journey‘
Asian Development Bank 58th Annual Meeting
Milan, 6 May 2025
Payments are the backbone of the financial system. An efficient payment system is
crucial for ensuring the secure and timely movement of funds between individuals,
businesses, and institutions – both domestically and internationally.
The efficiency and reliability of payment systems are often taken for granted, and
largely go unnoticed – until something goes wrong. In recent years, however, there
has been growing recognition that payments are not just a technical function but a
vital pillar of financial inclusion, financial stability, monetary sovereignty and even
geopolitics.
Technological progress has greatly improved the efficiency of domestic payment
infrastructures, reducing transaction costs and speeding up execution. However,
these gains have scarcely materialized for cross-border payments, which remain slow,
expensive and opaque. The reason is that technology alone is not enough: harmonized
rules and procedures are essential on this front, and making progress on these aspects
is more complex.
The stakes are high. In 2024, the global cross-border payments market was estimated
at over $190 trillion1 – nearly twice the size of global GDP – and it is projected to
surpass $300 trillion within the next 5 to 10 years.
I wish to thank Alberto Di Iorio, Antonio Perrella, Tara Rice and Stefano Siviero for their valuable
insights and contributions.
L. Ingham, A. Lawal and C. Allen, ‘How big is the cross-border payments market? 2032’s $65tn TAM’,
FXC Intelligence, 16 January 2025.
The G20 and international organizations have recognized the urgency of enhancing
payments across borders and have called for action, launching an ambitious Roadmap
to address this issue.2
Today, I will reflect on the key steps and motivations behind this initiative, discuss the
remaining challenges, and sketch out possible strategies to overcome them.
Why should we care about cross-border payments?
The G20 Roadmap sets out key objectives to improve all three segments of the crossborder payments market: wholesale payments (which are essential for the smooth
functioning of the global financial system), retail payments, and remittances (which have
a more direct impact on individuals’ daily lives).
The decline of correspondent banking: limited access and rising costs
Cross-border payments have always predominantly relied on a ‘correspondent banking’
model. Relying on a chain of intermediaries to complete a transaction inevitably makes
payments slower, more expensive and less efficient.3
To make things worse, the tighter prudential standards and stricter AML/CFT4 regulations
introduced after the Financial Crisis led to a decline in correspondent banking
relationships.5 Between 2011 and 2022 the number of active correspondent banks fell
by 30 per cent globally, with some regions experiencing reductions of nearly 50 per cent
(Figure 1.a).6 As a result, the network has become increasingly concentrated and less
competitive (Figure 1.b), which contributes to persistently high costs and, in extreme
cases, limits firms’ access to international trade.7
The G20 Roadmap aims to make cross-border payments faster, cheaper, more transparent and more
inclusive. Specifically, it seeks to achieve quantitative targets for each of the four objectives just
mentioned and for three different market segments: wholesale, retail, and remittances. In February
2023, the work was reprioritized around three main priority themes: i) payment system interoperability
and extension, ii) legal, regulatory and supervisory frameworks, and iii) data exchange and message
standards. See FSB, G20 Roadmap for Enhancing Cross-border Payments. Consolidated progress report
for 2024, 21 October 2024.
In a correspondent banking arrangement, the correspondent bank holds deposits owned by a foreign
bank (the respondent bank) and provides this respondent bank with payment and other services. See
CPMI, Correspondent banking, July 2016.
Anti-money laundering/countering the financing of terrorism.
FSB, Report to the G20 on actions taken to assess and address the decline in correspondent banking,
6 November 2015; T. Rice, G. von Peter and C. Boar, ‘On the global retreat of correspondent banks’,
BIS Quarterly Review, March 2020.
CPMI quantitative review of correspondent banking data.
L. Borchert, R. De Haas, K. Kirschenmann and A. Schultz, ‘The impact of de-risking by correspondent
banks on international trade’, VoxEU, 18 September 2024.
Figure 1
Correspondent banking market
(a) Change in the number of active
correspondent banks between 2011-22
(b) Correspondent banking market
(thousands, index number)
Global
average
(percentage change)
North
America
Eastern
Europe
Africa
Europe
(excl. Eastern)
Oceania
Americas
(excl. North)
−40
−20
Active correspondent banks
Gini index (1)
Source: CPMI quantitative review of correspondent banking data.
(1) Right hand scale.
The emergence of alternative solutions
These inefficiencies have triggered the rise of new technologies – such as distributed ledgers
– and new products – such as crypto-assets – in order to provide a better solution to
people’s payment needs. But it is a promise that needs to be taken with a large pinch of salt.
Unbacked crypto-assets pose significant risks, including the potential for substantial losses
for end users (Figure 2.a). More importantly, they do not fulfil payment functions as they
are highly volatile (Figure 2.b), lack intrinsic value and are often under-regulated or entirely
unregulated.
If properly designed and regulated, so-called stablecoins could instead perform some
payment functions. However, the proliferation of stablecoins running on non-interoperable
blockchains risks fragmenting the payments landscape and undermining overall efficiency.
In addition, regulatory frameworks vary significantly across jurisdictions, and the lack of
coordination, particularly between Europe and the United States, makes future outcomes
difficult to predict. 8
See for example, A. Di Iorio, A. Kosse and I. Mattei, ‘Embracing diversity, advancing together – results
of the 2023 BIS survey on central bank digital currencies and crypto’, BIS Papers, 147, June 2024. In the
US, two stablecoin bills have been introduced; one in the US House of Representatives (the ‘STABLE
Act’) and one in the Senate (‘GENIUS Act’). In addition, the US Administration issued an Executive Order
(EO) ‘Strengthening American Leadership in Digital Financial Technology’ on 23 January. In particular,
the EO instructs the new Presidential Working Group on Digital Asset Markets to propose a federal
regulatory framework governing the issuance and operation of digital assets, including stablecoins,
within 180 days of the order.
Figure 2
Crypto-asset market
(a) Bitcoin price drawdowns
in last five years
(b) Annualized volatility
of Bitcoin compared to S&P 500
(thousands of US dollars)
(per cent)
−25%
−25%
−50%
−80%
Bitcoin
2024 ’25
S&P 500
Sources: Based on CoinMarketCap and Nasdaq data as of 31 March 2025.
Finally, while stablecoins face the risk of a ‘run’ like banks, they typically lack some critical
safeguards such as access to central bank facilities, deposit insurance, and resolution
frameworks.
Prohibition is not the answer though. The only effective response to the emergence of
riskier alternatives is to provide retail payment solutions that are equally efficient, but
safer and more reliable.
The social impact
Inefficiencies in cross-border payments impose significant social costs on the most
vulnerable segments of the population.
Remittances often represent the main source of income for many low-income households,
and while they may appear modest in the context of total cross-border payments, they
are vital for certain economies, where they represent a large share of GDP (Figure 3.a).
Low-value remittances may incur disproportionately high fees relative to the amount sent
(Figure 3.b). However, high costs are only part of the problem. Many unbanked individuals
and people living in less developed economies lack access to payment services altogether,
forcing them to rely on informal, unsecured channels for cross-border payments.9
Unbanked individuals, particularly women from rural and impoverished areas, are disproportionally
excluded from the formal economy, due in part to lack of financial education and absence of suitable
alternatives.
Figure 3
Remittances in Asia
(a) Top 10 Asian countries by share
of remittance inflows
(b) Average cost of sending $200
to Asian countries
(percentage of GDP)
(per cent)
Tajikistan
Nepal
Kyrgyz Republic
Yemen
West Bank and Gaza
Uzbekistan
Georgia
Timor−Leste
Philippines
Jordan
Source: World Bank.
In principle, high remittance costs – which effectively resemble a tax on labour income
earned abroad – could even discourage workers from relocating and hinder international
labour mobility.
The Asia-Pacific region is particularly significant in this context, as it is the largest
recipient of international remittances worldwide. In 2023, it accounted for 38 per cent of
global remittance inflows, amounting to $328 billion. In 2022, remittances to low- and
middle-income countries in the region matched the volume of foreign direct investment,
highlighting their role as a vital financial lifeline for developing economies.10
Addressing inefficiencies in cross-border payments is an increasingly urgent matter.
In a world marked by growing interconnectedness, expanding e-commerce, and rising
international travel and migration, the social costs associated with them are likely to
increase over time.
Challenges and the way forward
These are the reasons why the G20 launched its Roadmap and set very ambitious
quantitative targets for improving cross-border payments.
Over the last five years, international organizations and standard setting bodies, such as
the Committee on Payments and Market Infrastructures (CPMI), which I chair, have worked
UNDP Regional Bureau for Asia and the Pacific, Beyond Borders: How Remittances Are Reshaping AsiaPacific Economies, January 2025.
doggedly to advance the Roadmap. Most of the planned actions have been completed,
and a wide range of infrastructure improvements have already been implemented.
Among other initiatives, let me highlight the work done to improve payment system
interoperability.11 The CPMI has developed frameworks to help payment system
operators make informed decisions on extending operating hours,12 expanding access
to new participants,13 and establishing sound governance and oversight arrangements.14
I should also mention the CPMI’s harmonized ISO 20022 message data requirements.15
When widely and consistently implemented, this messaging standard can significantly
accelerate payment processing, enhance automation – including in AML/CFT controls –
and reduce costs. These are real-world improvements that directly benefit users.16
Even in ‘good times’, it would take time for these efforts to translate into tangible
improvements for end-users. The proposed guidance should be properly enforced and
widely adopted. Moreover, several challenges continue to hinder progress towards the
Roadmap’s objectives. These include misaligned AML/CFT compliance controls and