The Future of Correspondent Banking Cross Border Payments

Abstract

This paper explores whether and how technological innovation, in conjunction with policy measures, can improve the process of correspondent banking cross-border payments. The paper builds on the empirical validation of existing shortcomings in this area of business by using a questionnaire and industry expert focus group sessions. Having identified the key areas of concern (e.g. cost, transparency, speed), several new network models for cross-border payments are assessed, in terms of their ability to address existing problems. Among the possible models, we also explore the use of innovative technologies such as distributed ledger technology (DLT). As a final step, we evaluate the different models and complement our findings with policy recommendations, in particular with a view to further streamlining Anti-Money-Laundering (AML) and Counter-Terrorist-Financing (CTF) as well as conduct of business rules in payments and supporting information sharing on suspicious transactions between institutions globally.