Cost and Value in Payments

 Today cross border payments have a reputation for high cost and lack of transparency in the fee structure.

Coupled with a 600 year old system of Vostro/Nostro accounts and Correspondent banks as middlemen the system is opaque as best and takes 5-7 days for settlement to conclude.

Where are these costs coming from? This graphic from Payments Canada will help.

Can fintechs help reduce costs? See this graphic from RBC in one of their pilot studies with Ripple 

Dramatic reduction in costs and speed yes. But real life is not a tech project. SWIFT with its network of 10000 banks, each node in the network has painstakingly negotiated contracts and SLAs , regulations in each jurisdiction have to be understood and compliance has to be managed.

The solution is ISO20022. The vision is end to end payment messaging with rich data to overcome barriers in speed, compliance and processing costs.