CPMI creates framework for linking payments

The Committee on Payments and Market Infrastructures has published a framework to guide authorities in linking up payment systems across borders.

The document, published on July 8, outlines how one country’s payment system may be connected to another. It also contains a survey of existing interlinkages and how they are structured.

The report finds 26 payment systems (about 10% of those surveyed), covering 22 jurisdictions, have some sort of interlinkage with a foreign system. The links tend to be set up for retail payments, and the majority are single-currency systems, although 40% allow multiple currencies.

Bilateral interlinkages may be structured as a direct link or go through an intermediary. A “hub and spoke” model or a “common platform” are also possible – both have a payments processing hub that may sit outside the jurisdictions that are connecting their payment systems.

The report adds that harmonising application programming interfaces (APIs) would help reinforce linkages. APIs can facilitate links by allowing smooth data transfers, but they operate on a range of different protocols, which need to be aligned if jurisdictions want to minimise payment friction.

Linking up payment systems “can shorten transaction chains, reduce overall costs, and increase the transparency and speed of payments”, the report says. However it notes there are risks as well, such as high start-up costs, possible misalignment of business continuity plans and divergent legal frameworks.