Structural Gaps Slowing Cross-Border Payment Goals, Says Mastercar
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Mastercard warns that beyond technology, systemic inefficiencies in the global financial architecture are stalling progress on faster, cheaper international transfers under the G20 roadmap
Mumbai
Mastercard has flagged that structural gaps in the global financial ecosystem are preventing progress toward the G20’s ambitious targets for faster, cheaper, and more transparent cross-border payments. Speaking in India, Pratik Khowala, Mastercard’s Global Head of Transfer Solutions, said that while technological solutions are advancing, the deeper barrier lies in systemic inefficiencies and fragmented regulatory frameworks.
Under the G20’s cross-border payments roadmap, member nations committed to achieving key goals by 2027: reducing average retail transfer costs to 1%, enabling 75% of cross-border payments to be delivered within an hour, and increasing transparency. However, according to a recent assessment, the roadmap is off-track—and Mastercard attributes much of the delay to structural, not just technical, deficits.
Where Technology Meets Structural Constraints
While improvements in payment rails, messaging standards (e.g., ISO 20022), and fintech innovations have made cross-border transfers faster and more traceable, they alone cannot overcome the deep-rooted challenges in correspondent banking, regulation, and settlement systems.
Khowala emphasized that progress is hindered by:
- Legacy correspondent banking models that introduce multiple intermediaries and inefficiencies
- Inconsistent regulation and compliance regimes across jurisdictions
- Fragmented standards for data, reporting, and settlement
- Liquidity and foreign exchange settlement issues between currencies and central banks
These structural constraints force even modern systems to operate over inefficient rails, limiting end-user benefit.
The G20 Roadmap: Targets and Missed Marks
The G20 roadmap, launched with high expectations, set clear metrics:
- Average retail cross-border costs to fall below 1%
- 75% of payments (wholesale + retail) to settle within an hour
- Full transparency of fees and remittance data
Yet, the Financial Stability Board (FSB) has cautioned that these goals are unlikely to be met. While some rails have improved speed, costs remain high and transparency gains lag at the user level.
Mastercard’s position is consistent: achieving the roadmap’s objectives demands more than new infrastructure—structural reforms are mandatory.
Impact on Businesses and Remittances
Small and medium enterprises (SMEs) and individual remitters face the brunt of inefficiencies. High transfer costs, opaque fee structures, and long settlement windows reduce their competitiveness and erode trust in cross-border payments.
In emerging markets, these frictions are more pronounced: remittance corridors see disproportionately high costs, often exceeding the 1% target margin. The journey of funds often involves multiple banks, FX conversions, compliance checks, and delays — amplifying cost and time.
Mastercard has attempted to bridge the gap using its Mastercard Move suite, which promotes faster money movement, better traceability, and optimized routing. But even it cannot fully bypass structural imbalances without reform in correspondent networks and settlement architecture.
What Needs to Change: Structural Priorities
To accelerate progress toward G20 cross-border goals, Mastercard recommends focusing on:
- Reforming correspondent banking networks — streamline and modernize how banks interconnect across borders
- Harmonizing regulation — standardized KYC, AML, compliance norms across countries to reduce friction
- Interlinking domestic payment rails — enabling seamless connectivity between national systems to reduce relay overhead
- Liquidity and settlement alignment — better coordination between central banks to ease currency settlements
- Data and transparency standards — universal formats for remittance data and fees to improve visibility
Only by aligning these structural components can technological innovations fully deliver improved cross-border payments at scale.
Risks and Roadblocks
Several risks threaten implementation:
- Sovereign reluctance to cede control or harmonize regulation
- Economic and political frictions between jurisdictions
- Legacy bank resistance to change due to vested interests
- High investment costs and coordination demands
- Slow adoption across developing markets lacking technical and regulatory readiness
Mastercard’s leadership warns that without sustained commitment, the G20 goals may remain aspirational rather than operational.
The Way Forward
In the near term, Mastercard plans to work with regulators, central banks, and financial institutions to pilot corridor-level improvements, leverage APIs and real-time rails, and push model frameworks for harmonization.
For the public and private sectors, the challenge is clear: technology is necessary but not sufficient. Structural shift is the linchpin for achieving true cross-border payment efficiency.
Mastercard’s message is urgent: bridging the structural chasm is no longer optional — it is essential if the promise of the G20’s cross-border payment agenda is to be realized.
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