Boston, MA
December 2008

Cross Border Payments: U.S. Banks Imperiled by Lagging Deployment of Real Time Gross Settlement Systems


In 2006, $2.5 trillion dollars in foreign exchange, cross border payments were settled each day. While cross-border payments will continue to grow in both dollar volumes and number of transactions, their foreseeable growth rate, tracking overall global economic trends, will dramatically slow.

This report from Mercator Advisory Group’s Corporate Banking Practice examines the global payments landscape focusing on the emerging Real-time Gross Settlement Systems poised to gain universal standards adoption. That standardization is the platform bedrock allowing cross-border payments systems to seamlessly work together, reducing risk for the multiple payments stakeholders in global trade.

Emerging real time gross settlement systems are being adopted across the European Union and by the central banks of emerging market powerhouses. Unfortunately, the U.S. banks, held captive by their legacy payments systems, have forfeited their leadership role in the facilitation of cross-border payments. While the United States remains the world’s leading importer and exporter of goods and services, its commercial banks for losing market share and millions of dollars of revenues as settlement responsibilities migrate to the leading banks of other nations.

One of the 16 Exhibits included in this report

To partner successfully with their commercial customers, United States banks must jettison their reliance on old payments mechanisms (like slow-to-settle letters of credit) and consolidate and update their own multiple payments systems. Business customers are demanding simpler, more efficient, and rapid payment methods, including the ubiquitous credit card.
While United States banks have been slow to embrace the changes (and enormous capital outlays and internal silo reorganizations) required to compete within the changing global payments arena, competitors are uniting to create single payment zones and simplified inter-bank clearing and settlement mechanisms.
European nations within the Single European Payment Area (SEPA) are aggressively promoting trade by simplifying and streamlining payments between themselves. European companies will benefit from this cooperation designed to eliminate the very existence of cross-border payments within SEPA and to replace the unique payment requirements of fiefdoms with common instruments, standards, procedure, and infrastructures to take advantage of economies of scale. The U.K.’s Faster Payments infrastructure revolutionizes how High Street banks expedite the processing and settlement of multiple types of commercial payments. The International Payments Framework (IPF) initiative leverages existing standards to develop a cross border payments process for non-urgent payments that simplifies interoperability between clearing and settlement mechanisms (CSM) and banks.

Sarsha Adrian, Senior Research Analyst in Mercator Advisory Group’s Corporate Banking practice and author of this report comments, “This report reviews the global payment market’s complexity and updates our members on SEPA and IPF initiatives standards adoption.”

This report is 39 pages long and contains 16 exhibits.

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Industry Segmentation: Identifying High Value Niche Opportunities

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