Twenty-four banks, including Bank of America, JPMorgan and Wells Fargo, are part of a pilot project for immediate cross-border (IXB) payments in dollars and euros.

The IXB pilot project involves U.S.-based The Clearing House’s (TCH) real-time payments (RTP) network, global messaging service SWIFT and the European EBA Clearing, which provides a real-time pan-European payment infrastructure, and is looking to streamline cross-border payments to ensure immediate transactions with automated instant confirmations.

While it may seem strange in the age of Venmo and Zelle, a real-time cross-border payments solution available 24/7, 365 days a year has yet to be realized. The IXB pilot is significant for banks, Erika Baumann, director of the Commercial Banking and Payments division at research firm Aite-Novarica Group, told Bank Automation News.

“Cross-border payments continue to be rife with friction with unpredictable fees, unpredictable settlement, very little data to be able to apply or confirm the payment, and difficulties in reaching some geographies makes it a prime target for innovation and improvement,” Baumann said. “This pilot of 24 banks is the first step to making instant cross-border payments the norm, as well as providing greater accessibility to financial institutions in all segments of the market.”

The IXB initiative has the potential to be “significant,” Joanne Strobel, managing director of global payments services at Wells Fargo, told Bank Automation News.

“It’s important for Wells Fargo to support initiatives that help us meet client expectations for faster payment methods that speed their access to working capital,” Strobel said. “The IXB initiative has the potential to be a significant development in cross-border payments by providing consistent real-time payment execution with increased fee transparency across regions.”

Available in the US and Europe

The IXB project will be available initially between the U.S. and countries served by the EBA, but expansion is planned, Steve Ledford, senior vice president of products and strategy at TCH, told BAN.

Still, the pilot is starting in “one of the world’s largest payment corridors,” said Mark Monaco, head of Enterprise Payments at Bank of America.

“The IXB initiative between EBA Clearing, SWIFT, TCH, together with a working group of leading U.S. and European financial institutions, demonstrates that faster cross-border payments between existing real-time systems are possible in one of the world’s largest currency corridors,” Monaco told BAN. “Having faster payments with transparent proof of settlement is a benefit for customers and economies on both sides of the Atlantic.”

“This has been an eagerly awaited step in the evolution of RTP capabilities in the U.S.,” Aite-Novarica’s Baumann said. “The importance is proving the solution — not the dollar limit.”

Currently, cross-border payments are completed through wire systems, which stop at the end of the business day and are not available on weekends, Ledford said. The IXB project would make transactions available around the clock using RTP networks at TCH and EBA, he added.

“What we’re really trying to do is make it where the entire process, end to end, is more streamlined,” Ledford told BAN. “The goal is to have a payment that is as close as possible to the experience you’d have sending a real-time payment domestically.”

The UK and India currently have banks that already forward cross-border transactions over their domestic instant payment systems — Faster Payments in the UK and NCPI in India– and by doing so, offer instant cross-border payments to customers banking with other banks in the UK and India, a SWIFT spokesperson told BAN.

How IXB works

The IXB application was developed by SWIFT, TCH and EBA to orchestrate the messages between two networks and ensure that settlements on both sides are synchronized, Ledford said. A proof of concept between the three organizations was completed in October 2021. IXB will use the ISO 20022 messaging format, which will replace the SWIFT MT format in November 2022.

The IXB application ensures the transaction occurs immediately and provides automated confirmation of payment within seconds, Ledford added.

Beyond the convenience of faster payments, IXB will make complex transactions easier to coordinate, he said. For example, instant payments may lead to faster shipping times as traders are paid immediately, and general contractors could instantly gain the funds necessary to pay subcontractors on overseas projects.

“That immediate confirmation of the payment and the ability to immediately move the money, makes a big difference,” Ledford said.

Limits for the IXB transfer are still being finalized. Currently, cross-border payments would be limited by those imposed by the RTP networks of TCH and EBA. Currently, EBA has a 100,000-euro limit while TCH in April raised its limit to $1 million from $100,000, a limit that is more policy-based than technological, Ledford told BAN.

“As we get experienced, we could raise that,” he added.

Participating banks

There are 24 banks participating in the IXB pilot, including the following:

• ABN AMRO Bank
• Allied Irish Banks
• Bank of America;
• Bank of New York Mellon
• BBVA Group
• BNP Paribas
• Credit Agricole
• Deutsche Bank
• ERSTE Group Bank
• Helaba
• HSBC
• ING
• Intesa Sanpaolo Bank
• KBC
• J.P. Morgan
• PNC Bank
• Societe Generale
• Toronto Dominion
• UniCredit S.p.A.
• UniCredit Bank / HypoVereinsbank
• Wells Fargo