A Tale of Two Projects

Central banks are exploring ways to make cross-border wholesale payments faster and cheaper using new technologies such as tokenisation. A recent Financial Times article lays out the options ¹.

Most cross-border payments currently happen through the correspondent banking network, but this can be slow and expensive – especially for transactions that involve far-flung countries or less frequently traded currencies. To receive international payments, a local bank needs to hold an account at a foreign bank that is located in the jurisdiction where the payment is made. If the local bank has no such relationship abroad, the payment has to go through third-party banks in which both payer and payee banks have accounts.

Short comings of correspondent banking Correspondent banking is based on a chain of bilateral relationships. The result is: