Rather than building a single global rulebook for payments, regional rulebooks are the better approach in the medium term, according to industry participants.

What is this article about? Policymakers are working to improve cross-border payments. Following the success of the EU’s Single Rulebook, this is expected to be expanded through a global or single rulebook approach.

Why is this important? To create a better cross-border payments system, the industry will need to adapt technology and regulation. This is a vast change that industry should be ready for, but the existence of multiple regional rulebooks could pose questions of cross-border cooperation for UK firms.

What’s next? Think tanks and regulators have announced their intention to focus on industry collaboration with regulators and technological improvements in emerging markets. However, one global rulebook is still a long way off.

The need for greater cross-border collaboration in the payments space has been clear for a long time and gained greater traction in recent years. The rulebook concept exists to encourage better cross-border regulation and build on the EU’s Single Rulebook approach to improve payments globally.

“There are overwhelming advantages to a single rulebook across Europe [because] it enables nimble organisations to deliver similar services across different countries from Austria to Spain,” says Andrea Ramoino, chief strategy officer at Contis.

Ramoino argues that a single rulebook would allow “businesses to develop an efficient service proposition and working model in a single country, and then with adding regional context, achieve quick geographic expansion, which in turn develops more opportunities and competition, prompting sector growth”.

While a single rulebook would solve some problems, such as the cost and time it takes to move money internationally, industry participants are concerned by the differences in maturity of various markets. They believe a regional rulebook approach would alleviate such concerns and would follow the BIS Project Nexus efforts in the Asia Pacific region.

For firms based in the UK, the existence of multiple regional rulebooks could pose questions of cross-border cooperation and which countries should be prioritised for the collaborative effort.

“There’s no one size fits all approach to cross-border payments – all jurisdictions are starting at different points of development, with different priorities, motivations and systems,” says Tara Rice, head of secretariat at the Committee on Payments and Market Infrastructure (CPMI) at the Bank for International Settlements (BIS) during a PIIE webinar. For example, while the EU member countries already have a shared policy and financial infrastructure, the picture is much more diverse in the Asia Pacific region.

Nevertheless, a consistent infrastructure and regulations would enable firms to expand their business and reach new customers easily.

The challenges of a rulebook

The concept of a regional rulebook poses many challenges, such as the need for shared data flows in an increasingly data-private environment. However, as regulators work towards this goal, it’s important that industry members are ready for the changes.

“One thing for organisations to remember when working with a single rulebook is to still expect fluctuations and be prepared to adapt,” says Ramoino.

As with many cross-border policy efforts, the political angle could have an impact on firms. “Countries will inevitably always want to control their own destiny which is the opposite to the principles of a single rulebook,” he says.

Further concerns from the industry include safety and reliability. The issues at stake are not just about regulatory divergence, but technological developments and unifying them, such as how to build interoperability between legacy data systems and open APIs.

To handle these shifting priorities the key is to focus on what’s most important.

“Industry and regulators must ruthlessly prioritise their approach to the single rulebook and come up with staggered goals,” says one head of public policy at an international e-commerce firm. For her, the focus should be on building harmonisation where possible as soon as possible and then considering a more global or broad approach later.

Agreed standards could hold the key to success

For some industry participants, the solution will be in the development of standards.

“One component that would be so critical to the single rulebook would be standards,” says another head of public policy at a leading international payments firm. “Standards cut across legal, technical and regulatory harmonisation, and regions are so fragmented that standards on public-private engagement would be so useful.”

For firms in the crypto space, such standards and the concept of the single rulebook is particularly important.

“We stand behind guidelines that give regulatory clarity and provide a framework for the industry to operate within,” says Andrew Whitworth, policy director for EMEA, at Ripple. “While the use of cryptocurrency in payments shouldn’t require a standard taxonomy everywhere, developing a set of rules that promotes cross-border interoperability is definitely important.”

The Financial Stability Board released a report on 10 October about the progress on the G20’s cross-border payments initiatives and laid out its next priorities. These include the development of specific proposals for material improvements to underlying systems and the development of new systems.

For CPMI’s Rice, the priority will be enhanced engagement with emerging markets and the provision of technological assistance for these jurisdictions.

As the report notes, the success of this work will depend heavily on the commitment of public authorities and the private sector working together.