Factors that Facilitate and Impede Cross Border Payments Carol Clark Payments in the Americas...
-
Upload
jasmine-harvey -
Category
Documents
-
view
217 -
download
0
Transcript of Factors that Facilitate and Impede Cross Border Payments Carol Clark Payments in the Americas...
Factors that Facilitate and Impede Cross Border
Payments
Carol ClarkPayments in the Americas
Federal Reserve Bank of AtlantaOctober 7, 2004
Scope of Study
• I. Cross border payments marketplace excluding securities transactions
• II. Detailed information on 16 countries that have considerable ACH volume
• III. Policy issues related to international payments
• IV. Future considerations
Key Points
• Projected growth in cross border payments
• Payment barriers
• Players in global electronic marketplace
• Two cross border payment models
Key Points
• Payment networks are two-sided markets
• Challenges for new payments providers
– Establishing critical mass– Aligning incentives for each of the
payment participants
Projected Growth in Marketplace
• U.S. largest sender of remittance payments in world
• Last half of 1990’s remittance flows to Latin American countries doubled
• Remittances to Mexico, El Salvador, Guatemala, Honduras, Nicaragua will increase from $10.2 billion in 2000 to $18 billion in 2005 (Pew Hispanic Center)
Projected Growth in Marketplace
• Global retail payments projected to grow – 10.2% by 2010 – 7.8% in the Americas (Boston Consulting
Group)• Cross border payments may double 2003-2005
(Unisys, Global Concepts, Talson)• Media attention on providing inexpensive,
reliable remittance services
Cross Border Payment Barriers
• Banks and end users view cross border payments as costly and cumbersome
• Incentives to develop faster and lower cost systems do not exist
• Small payment volumes present challenges to developing critical mass
Global Payments Marketplace
• Marketplace concentrated among a few players
– Financial Institutions
– Non-Bank Providers
– Central Bank or Privately Owned Payment Systems
• Infrastructure costs may drive further consolidation
Two Payment Models
• Correspondent/Network Relationship Model
• Tiered Relationship Model
Correspondent/Network Model
InstitutionA
InstitutionB
Sender Receiver
Bilateral Accounts
Tiered Relationship Model
InstitutionA
Supra-RegionalEntity
InstitutionB
Sender Receiver
Institution Institution
Sender Receiver
Two Sided Markets
Factors that Influence Senders
• Consumer/Business
• Cost
– Proximity
– FX Conversion
Factors that Influence Senders
• Cost
– Timing
– Standards
• Reliability
Factors that Influence Senders
• Financial Literacy
– 58% immigrants do not have bank accounts
– For those with accounts, less than one quarter use them to send remittances
– Documentation concerns
Institution Concerns
• Regulation
• Payment Revenue
Institution Concerns
• Costs
– Technology platform
– IT investment
– Liquidity
Institution Concerns
• Standards
– Interfaces
– Formats
– New Procedures
– STP
Factors that Influence Receivers
• Timing
• Reliability
• Cost
– Proximity
– FX
– Institution
Conclusions
• Concentrated and two-sided market
• High unit costs relative to domestic markets
• Standards vary more than in domestic markets
• Challenges in developing critical mass and aligning incentives
Conclusions
• Regulation may unintentionally and inadvertently impact sender
• Business Case
• Education
Questions?