WEF policy recommendations for cross-border payments, connecting digital economies

Executive summary

The rapid expansion of access to digital payments has made it possible for consumers to conveniently make purchases for goods and services from merchants around the world. The current COVID-19 public health crisis will only accelerate digital trade and cross-border e-commerce as physical commerce contracts and digital commerce expands. However, significant challenges for digital trade and cross-border payments persist, providing an opportunity for policy-makers and regulators worldwide to reduce friction and improve connections between digital economies globally.

This report builds on past World Economic Forum research and leverages the Forum’s extensive community of payment experts in order to move beyond the challenges and provide governments with concrete recommendations to promote inclusive growth in the digital economy. Each recommendation addresses its respective challenge as follows:

Barriers to supplying payment services

The challenge: A growing number of protectionist measures, such as domestic infrastructure requirements, forced data localization, and licensing and equity requirements for foreign service firms, prevent international payment service providers from bringing services to market. Additionally, these measures keep domestic providers from expanding abroad, which is essential for firms that want to bring their services to scale.

Recommendations

– Provide, reinforce and/or extend “national treatment” for digital payment service providers
– Support commitments to protect the free flow of data while ensuring regulatory access to data
– Create a “reference paper” on payment services at the World Trade Organization
– Explore creating regional payment councils to bring the public and private sectors together

Standards and interoperability

The challenge: The cross-border payment landscape is more competitive and complex than ever but diverging regulatory and technical standards have increased friction in making payments.

Recommendations

– Explore digital trade agreements to promote greater interoperability
– Establish open banking guidelines to spur competition and innovation
– Adopt international standards for public infrastructure
– Adopt Financial Action Task Force standards
– Work with the international community when developing new standards for new technologies and regulatory regimes

Security and trust

The challenge: Cross-border payments are disproportionately targeted by fraud and cybersecurity threats, and small businesses are particularly vulnerable. Furthermore, many policies to improve cybersecurity and trust are either ineffective or counterproductive.

Recommendations

– Establish public-private partnerships on cybersecurity
– Encourage law enforcement cooperation and modernize mutual legal assistance treaties
– Encourage cyber hygiene through governmentled programmes
– Work with the private sector to establish important consumer protections

Innovation enabling oversight

The challenge: The adequate supervision and oversight of payment systems is integral to the safety and security of the financial system. However, the oversight for firms operating in multiple markets is often disjointed and uncoordinated, leading to inefficiencies and reduced competition.

Recommendation

– Explore bilateral, regional and multilateral oversight coordination

Dynamics in cross-border payments are rapidly changing, creating a network of mutually independent but highly interconnected networks. This report finds that the challenges facing crossborder payments are also highly interdependent and, therefore, holistic reforms are needed to ensure competition and reduce friction.