## anea2023001

## Source details

**Canonical URL:** [anea2023001](https://www.imf.org/-/media/files/publications/analytical-notes/2023/english/anea2023001.pdf)

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---

### Executive summary — Scope and purpose and high-level findings
- Provides an assessment of whether and how multilateral platforms could bring meaningful improvements to the cross-border payments ecosystem.
- Written by the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) in collaboration with the BIS Innovation Hub, the International Monetary Fund (IMF) and the World Bank.
- Based on a CPMI stocktake of existing and potential multilateral platforms and bilateral discussions with existing platform operators.
- Definition and role of multilateral platforms:
  - A multilateral platform is a payment system for cross-border payments that is multi-jurisdictional by design and allows entities from several jurisdictions to participate.
  - May substitute for or operate alongside traditional correspondent banking relationships or bilateral interlinking of domestic payment infrastructures.
  - Can shorten transaction chains and may offer extended operating hours and ease AML/CFT compliance checks depending on design.
  - When built as new, can reduce dependencies on legacy systems by implementing the latest technology and payment message standards.
- Potential benefits if underlying frictions are mitigated:
  - Reduce costs of cross-border payments.
  - Increase safety.
  - Increase speed.
  - Increase transparency.
  - Could implement new functionalities, such as multi- or cross-currency settlement.
- Two conceptual implementation approaches:
  - Growth approach: expanding existing multilateral platforms to additional jurisdictions, currencies and participants; may require additional public-private sector involvement and coordination.
  - Greenfield approach: building a new, potentially global infrastructure for cross-border payments; may entail complex governance discussions and cooperative oversight arrangements.
- Policy and implementation guidance:
  - Policymakers should consider trade-offs of multilateral platforms and the evolving nature of the cross-border payments market.
  - Payment system operators and authorities can use this analysis to evaluate the best approach and plan preparatory steps.
- Relationship to the G20 cross-border payments programme:
  - The report is part of the G20 cross-border payments programme and presents the output of building block 17 action 2.
  - Action 1: CPMI Future of Payments working group (FoP) conducted a stocktake as part of a larger survey asking central banks about existing and planned multilateral platforms.

*Source: anea2023001 - Executive summary; https://www.imf.org/-/media/files/publications/analytical-notes/2023/english/anea2023001.pdf*

### 2.2 Key design choices and related considerations
- Choice of network model:
  - Two primary models: hub and spoke; common platform.
  - Participants must adhere to a single, common rulebook.
  - Hub and spoke:
    - Hub may operate with a minimal, uniform set of rules if laws and regulations across spokes are consistent.
    - Inconsistencies (eg on settlement finality or enforceability of netting) require identification of risks and development of mitigation rules and procedures.
    - May leverage existing relationships between spokes and their participating PSPs for domestic payments.
    - Updating functionality may require tailoring technical solutions for each spoke and changing how spokes exchange information via the hub.
    - Differences among spokes (access requirements, pre-funding floors, transaction amount caps, liquidity management tools) can lead to uneven distribution of costs and heterogeneous service levels.
  - Common platform:
    - Platform rules and procedures must be consistent with relevant laws and regulations of each jurisdiction in which it operates.
    - Stakeholders need to agree on almost every aspect of the platform’s activities; reaching agreement can be costly and time-consuming.
    - Typically built on a single technical infrastructure; updating requires implementation in one system only.
    - May be less technically complex and more efficient to operate and maintain and better positioned to offer harmonised payment services at transparent and non-discriminatory prices.
- Examples of multilateral platform features (functional areas):
  - Liquidity management: Intraday credit facilities; Liquidity-saving mechanisms; Collateral management functions.
  - Payment messaging: Standardised messaging; Proxy lookup registries; Pre-validation services; APIs; Limited operating hours or 24/7/365; Quantity and time limits; Capital flow management measures.
  - Compliance and data processing: AML/CFT and fraud monitoring; KYC registries; Privacy and data management.
  - Clearing: Single or multi-cycle; Bilateral or multilateral.
  - Settlement: Legal finality and technical settlement; RTGS or deferred net settlement; Settlement currency; Type of settlement asset (commercial bank money, central bank money, crypto); Settlement risk management measures (eg prefunding).
  - Foreign exchange (FX): Currency conversion; Payment versus payment (PvP).
- Choice of currency arrangement — three types:
  - Single currency platform:
    - Transactions processed in one currency: (i) a common currency of a currency union; (ii) a national currency commonly used for international trade among connected jurisdictions; or (iii) an international reserve currency such as the US dollar or the euro.
    - Conversion from any other currency to the settlement currency is provided outside the arrangement by the payer’s PSP, the payee’s PSP and/or an international settlement bank.
  - Multicurrency platform:
    - Transactions processed in multiple currencies using account structures segregated by currency.
    - Currency conversion happens outside the platform; cross-currency transactions on the platform are not possible.
    - Participants may be able to exchange currencies with the platform when funding and defunding their accounts.
    - To transact in multiple currencies, participants need to maintain multiple settlement accounts with the platform.
  - Cross-currency platform:
    - Conversion from one currency to another takes place on the platform, allowing one connected PSP to be debited in one currency and another to be credited in another currency.
    - FX rates may be set, and liquidity may be provided, by the platform itself or by third-party FX providers, which may or may not include a mechanism enabling FX transactions to be settled using PvP.
    - Participants can choose to maintain only one settlement account with the platform.
- Factors influencing currency arrangement choice: purpose of the platform; liquidity of chosen currency(ies); exchange restrictions or capital controls; exchange rate regimes.
- Effects on frictions — seven frictions identified: (i) legacy technology platforms; (ii) fragmented and truncated data formats; (iii) funding costs; (iv) long transaction chains; (v) weak competition; (vi) complex processing of compliance checks; and (vii) limited operating hours.
  - Legacy technology and data formats:
    - New platforms can avoid batch processing, include real-time monitoring, and implement ISO 20022; ISO 20022 must be implemented across all participants (direct and indirect) to avoid message conversion and associated risk of data loss.
    - APIs can connect platforms with existing systems; ancillary services (proxy lookup, fraud monitoring, pre-validation) add complexity and potential regulatory adjustments.
    - Trade-off between innovation and interoperability; possible mitigation: ancillary services that translate messages from ISO 20022 to local formats (noting risk of data loss).
  - Funding costs:
    - PSPs need sufficient liquidity in all currencies; multicurrency platforms with sufficient reach may allow liquidity pooling.
    - Settlement model matters: DNS is less liquidity-intensive than RTGS but exposes participants to credit risk.
    - Platforms can require pre-funding to reduce credit risk; prefunding could draw on assets pre-positioned but not yet pledged as collateral for intraday credit.
  - Long transaction chains:
    - Platforms may shorten chains by allowing direct send/receive between participants, reducing processing time and unpredictable fees.
    - Empirical note: on SWIFT gpi in September 2020, each additional intermediary prolonged elapsed payment time by an average of three hours; fewer than 1% of payments involved more than two intermediaries.
  - Weak competition:
    - Platforms can enable PSPs that cannot reach each other directly to reach each other, lowering onboarding burden relative to multiple correspondent relationships.
    - Widely used platforms can serve as single access points, potentially mitigating de-risking in certain corridors.
    - Platforms should create a level playing field between banks and non-bank PSPs to avoid disintermediation or higher barriers for other platforms.
  - Complex processing of compliance checks:
    - Platforms can provide comprehensive monitoring and screening tools with a broader overview of the transaction chain; detecting anomalies requires sharing of relevant reference data.
    - Platforms could streamline AML/CFT compliance by limiting participation to entities subject to tighter regulation (eg those with banking licences).
  - Limited operating hours:
    - Operating hours depend on network model and use case; global reach platforms might choose to operate close to 24/7/365.
    - Extending operating hours can mitigate friction but may increase operational costs.

### 3. Stocktake of multilateral platforms — scope, findings and uptake
- Stocktake overview:
  - In early 2021, the CPMI carried out a stocktake of existing and potential multilateral platforms; in late 2021 and early 2022, CPMI engaged with platform operators and other entities.
  - At the time information was collected, 20 different cross-border payment systems could be classified as multilateral platforms.
  - Platforms are described across four dimensions: Geographical scope (regional or global); Market segment (wholesale or retail); Type of currency arrangement (single currency or multicurrency); Network model (common platform or hub and spoke).
- Regional wholesale platforms (findings):
  - Nine regional wholesale platforms identified.
  - Of these nine, four are RTGS systems for single currency areas owned and operated by monetary authorities:
    - ECCB-RTGS by the Eastern Caribbean Central Bank for the Eastern Caribbean dollar.
    - STAR-UEMOA by the Central Bank of West African States for the West African CFA franc.
    - SYGMA by the Bank of Central African States for the Central African CFA franc.
    - TARGET2 by the Eurosystem for the euro.
  - The five remaining regional wholesale platforms were established through public initiatives and are owned and operated by public sector entities:
    - AFAQ (Gulf Cooperation Council).
    - EAPS (East African Community).
    - REPSS (Central African Economic and Monetary Community).
    - SADC-RTGS (Southern African Development Community) — a common platform run by the South African Reserve Bank; processes primarily intraregional cross-border payments denominated in the South African rand; domestic payments are handled by participating jurisdictions’ national payment systems (eg BISS in Botswana).
    - SIP (Central American Monetary Council).
- Regional retail platforms and other regional initiatives — four identified:
  - Buna (Arab Monetary Fund) — participants from 22 states in the Arab region; Buna also processes wholesale payments to a lesser extent.
  - PAPSS (Afreximbank) — pan-African scope aiming to cover the entire continent.
  - P27 — privately owned clearing system in development for retail payments in the Nordic region.
  - TIPS — a fast payment system (FPS) for the euro among Eurosystem countries; might evolve from single to multicurrency; ECB, Bank of Italy and Sveriges Riksbank are exploring a possible cross-currency settlement service between TIPS and RIX-INST.
- Global platforms and explored concepts:
  - Three existing global platforms are multicurrency common platforms:
    - CLS (settles wholesale FX trades; does not settle cross-border payments for goods and services).
    - Two global four-party card schemes: Mastercard and Visa (process cross-border and domestic retail payments; have launched services such as “Visa Direct” and “Mastercard Send” for P2P cross-border payments).
  - Amplus: a Deutsche Bundesbank concept targeted at remittances envisioning central banks as direct participants holding accounts in a global multicurrency system with an addressability scheme and a KYC identifier.
  - Three projects exploring wholesale CBDC-based settlement assets: Project Dunbar; Project mBridge; Project Jura.
- Other arrangements closely related:
  - Project Nexus (BIS Innovation Hub Singapore Centre): proposes linking existing FPS using APIs; Nexus Gateway envisioned as a hub connecting existing FPS.
  - MFS Africa: enables PSPs to leverage a single relationship to send and receive cross-border payments via domestic or regional rails; can be characterised as a payment aggregator.
- Uptake and potential:
  - Apart from CLS, Mastercard, Visa and four platforms that serve single currency areas, levels and growth rates of payment volumes on many multilateral platforms are low compared with the global cross-border payments market.
  - Most multilateral platforms have yet to reach their full potential; increased public sector support and international coordination could help extend geographical reach.

### Risks, barriers and challenges — legal, operational and illicit finance
- Legal risk:
  - Cross-border operations present greater legal risk due to interactions between multiple statutory and regulatory frameworks.
  - Potential legal issues: differing protections for settlement finality and netting; varying access laws and regulations; jurisdiction-specific regulatory requirements (domestic processing mandates, foreign equity caps, data residency rules); misaligned data frameworks; regulatory limits on foreign direct investments and residents’ holdings of foreign currency.
  - Implications and mitigation: legal issues can act as barriers; close monitoring of local laws and early engagement with domestic authorities can help; stronger regional integration may catalyse alignment of regulatory frameworks.
- Operational risk:
  - Common platforms vulnerable to single point of failure or cyber attack; hub and spoke systems may present larger attack surfaces.
  - Reliance on third parties exposes platforms to third-party performance risk; contracts and service agreements across jurisdictions may not be fully enforceable everywhere.
  - Mitigation: pooling resources and identifying sources of operational risk during design and on an ongoing basis.
- Illicit finance risks:
  - Risks include money laundering, terrorist financing and sanctions evasion.
  - Sanctions compliance responsibility lies with financial institutions; competent authorities monitor financial institutions rather than the multilateral platform.
  - AML/CFT and messaging requirements: institutions must include accurate originator and beneficiary information and pass on information throughout the chain.
  - Visibility and control: platforms theoretically have a broader view and could better identify fraud or AML/CFT violations; in hub and spoke the hub may lack visibility into spokes or indirect participants.
  - Practice: some platforms offer screening or monitoring tools; many leave AML/CFT compliance to participants.

### 4.4 FX and liquidity risk — exposures, constraints and mitigations
- FX volatility exposures:
  - Platforms exposed to unexpected volatility in FX rates; FX volatility may affect participants’ liquidity risk management if unable to obtain enough of a volatile currency for settlement.
  - Principles 7 and 12 of the PFMI elaborate on liquidity risk and principal risk, respectively.
- Platform choices and risk sharing:
  - Platform may perform currency conversion itself by offering FX rates fixed for a limited period; platform would then share FX risk with participants and need to manage associated credit and liquidity risks.
- Liquidity provision constraints:
  - A platform’s ability to manage liquidity risk may be constrained relative to certain domestic systems; there may be no monetary authority that can provide intraday liquidity to participants.
  - Liquidity bridges between central banks and multilateral platforms could help but are currently unavailable.
  - Liquidity bridge: a cross-currency intraday liquidity arrangement between two or more central banks (CPMI (2022e)).
- Mitigation options and trade-offs:
  - Settle in a few, very liquid currencies to reduce FX and liquidity pressures (but may limit regional/local currency use).
  - Require participants to fully pre-fund accounts to initiate payments (reduces platform liquidity exposure).
  - Choose deferred net settlement rather than real-time settlement to reduce liquidity demands (but introduces credit risk and trust requirements).
  - Trade-offs: pre-funding and deferred net settlement reduce liquidity risk but may affect services and timeliness.

### 5.4 Potential roles for the public sector
- Public sector roles overview:
  - Traditional roles: (i) catalysts; (ii) regulators, supervisors and overseers; and (iii) operators.
- Role as catalyst — enabling environment and market formation:
  - Public institutions could develop a global vision and formulate expectations through guidelines or mandates; actively coordinate market incentives; leverage public-private industry groups; assist in attracting enough participants for scale.
  - Public sector seed financing could address positive externalities unattractive to private providers.
  - Public-private partnerships or public sector involvement in governance may help overcome inertia (CLS public-private cooperation cited as an example).
- Role as regulator, supervisor and overseer — framing standards and cooperative oversight:
  - Authorities can frame multilateral platforms within regulatory standards and assist in legal and regulatory coordination (including data frameworks) to create an enforceable legal basis.
  - Adjustments to domestic regulation may increase costs and lengthen development timelines.
  - A multilateral platform requires comprehensive oversight recognising cross-jurisdictional impact and may require new cooperative oversight and supervisory arrangements.
    - Precedent: CLS is overseen by the CLS Oversight Committee comprising the 18 central banks whose currencies are settled in CLS and five national central banks from the euro area.
  - Participating authorities would likely need to agree on a lead overseer and a mechanism for sharing information.
  - Public sector should monitor establishment and evolution to ensure participation requirements and pricing policies support fair and open access, and governance arrangements uphold fair competition and interoperability.
- Role as operator — operational implications and safeguards:
  - In hub and spoke with central bank systems as spokes, central banks may need to adjust operating hours, messaging standards and access criteria; these changes could affect system costs and create disincentives to join a global platform.
  - If the public sector operates a global platform, more significant changes in central banks’ operational role may be required (including risk tolerance and risk management).
  - Overarching principle: public initiatives should avoid crowding out private ones if governance and fair competition can be guaranteed.
  - Central bank roles depending on design: settlement agents; providers of accounts and banking services; providers of liquidity bridges to ensure sufficient liquidity.
  - New global platforms would be expected to operate 24/7 or adopt an incremental approach to 24/7 operating schedules, with implications for central bank operations.
- Monitoring, competition and access considerations:
  - Public sector monitoring should ensure participation requirements, pricing policies and governance support fair and open access, fair competition and interoperability.
  - Public sector involvement in governance and oversight can help address risks, barriers and challenges—especially in the startup phase where decisive public leadership may be required.

*Source: anea2023001 - Executive summary; https://www.imf.org/-/media/files/publications/analytical-notes/2023/english/anea2023001.pdf*

### Executive summary ......................................................................................................

### anea2023001 - Executive summary

### Scope and purpose
- Provides an assessment of whether and how multilateral platforms could bring meaningful improvements to the cross-border payments ecosystem.
- Written by the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) in collaboration with the BIS Innovation Hub, the International Monetary Fund (IMF) and the World Bank.
- Based on a CPMI stocktake of existing and potential multilateral platforms and bilateral discussions with existing platform operators.

### Definition and role of multilateral platforms
- A multilateral platform is a payment system for cross-border payments that is multi-jurisdictional by design.
- Designed to allow entities from several jurisdictions to participate and to enable customers of any participating PSP in one jurisdiction to pay customers of any other participating PSP in another jurisdiction.
- May substitute for or operate alongside traditional correspondent banking relationships or bilateral interlinking of domestic payment infrastructures.
- Can shorten transaction chains by allowing more direct sending/receiving between participants in different jurisdictions.
- May offer extended operating hours and ease AML/CFT compliance checks depending on design.
- When built as new, can reduce dependencies on legacy systems by implementing the latest technology and payment message standards.

### Potential benefits and frictions addressed
- To the extent a multilateral platform mitigates underlying frictions, it could:
  - Reduce costs of cross-border payments.
  - Increase safety.
  - Increase speed.
  - Increase transparency.
- Could meet growing demand driven by deeper economic and financial integration and by PSPs’ digitalisation strategies.
- Could implement new functionalities, such as multi- or cross-currency settlement.

### Legal, operational and comparative considerations
- Multilateral platforms often involve more complicated legal and operational issues relative to domestic payment systems.
- Decisions to increase the role of multilateral platforms should weigh trade-offs, risks and benefits relative to other cross-border arrangements such as correspondent banking, not merely relative to domestic systems.
- The potential improvements depend on concrete platform design and the current state of cross-border arrangements in a region or for a payment system function.

### Two conceptual implementation approaches
- Growth approach:
  - Expanding existing multilateral platforms to additional jurisdictions, currencies and participants.
  - May include extending access to foreign participants and interlinking with domestic systems and other platforms.
  - Could be based on existing institutional arrangements but may require additional public-private sector involvement and coordination.
- Greenfield approach:
  - Building a new, potentially global infrastructure for cross-border payments.
  - Could foster greater alignment of certain aspects of cross-border payments.
  - May entail complex governance discussions, cooperative oversight arrangements and careful balancing of public and private sector roles.

### Policy and implementation guidance
- Policymakers should consider:
  - Trade-offs of multilateral platforms.
  - The evolving nature of the cross-border payments market.
- Possible further measures could include efforts by regional bodies, operators and/or international organisations to realise the potential of multilateral platforms.
- Payment system operators and authorities contemplating expansion or establishment can use this analysis as a basis for evaluating the best approach for their specific circumstances and to plan preparatory steps.

### Relationship to the G20 cross-border payments programme
- The report forms a part of the G20 cross-border payments programme and presents the output of building block 17 action 2.
- In action 1, the CPMI Future of Payments working group (FoP) conducted a stocktake of existing and potential multilateral platforms and evaluated their risks and benefits.
- The action 1 stocktake was carried out as part of a larger survey on cross-border payments, in which the CPMI asked central banks about existing and planned multilateral platforms and their views on how such platforms might address frictions.

*Source: anea2023001 - Executive summary; https://www.imf.org/-/media/files/publications/analytical-notes/2023/english/anea2023001.pdf*

### 2.2 Key design choices and related considerations

### 2.2 Key design choices and related considerations

### Choice of network model
- Two primary network models discussed: hub and spoke; common platform.
- Participants in a multilateral platform must adhere to a single, common rulebook.
- Hub and spoke:
  - Hub entity could operate with a minimal, uniform set of rules if laws and regulations across spokes are consistent.
  - For any inconsistencies (eg on settlement finality or the enforceability of netting arrangements), the hub and spokes must identify associated risks and may need to develop specific rules and procedures to mitigate them.
  - May leverage existing relationships between spokes and their participating PSPs for domestic payments, allowing stakeholders to focus on cross-border specifics via the hub.
  - Updating functionality may require tailoring technical solutions for each spoke system and changing how spokes exchange information via the hub.
  - Differences among spokes (access requirements, pre-funding floors, transaction amount caps, liquidity management tools) can lead to uneven distribution of costs and heterogeneous service levels.
- Common platform:
  - The platform’s rules and procedures in their entirety must be consistent with relevant laws and regulations of each jurisdiction in which it operates.
  - Stakeholders need to agree on almost every aspect of the platform’s activities; reaching agreement can require compromise and be costly, time-consuming, and may introduce inefficiencies.
  - Typically built on a single technical infrastructure, so updating a common platform requires implementation in one system only.
  - May be less technically complex and more efficient to operate and maintain than hub and spoke.
  - Better positioned to offer harmonised payment services at transparent and non-discriminatory prices and to recover costs as a single technical infrastructure with a common rulebook.

### Examples of multilateral platform features (functional areas)
- 1. Liquidity management
  - Intraday credit facilities
  - Liquidity-saving mechanisms
  - Collateral management functions
- 2. Payment messaging including authentication, initiation, submission and conditionality
  - Standardised messaging
  - Proxy lookup registries
  - Pre-validation services
  - APIs for technical integration with third parties
  - Limited operating hours or 24/7/365
  - Quantity and time limits
  - Capital flow management measures
- 3. Compliance and data processing
  - AML/CFT and fraud monitoring
  - KYC registries
  - Privacy and data management
- 4. Clearing including netting (where applicable)
  - Single or multi-cycle
  - Bilateral or multilateral
- 5. Settlement
  - Legal finality and technical settlement
  - Real-time gross or deferred net settlement
  - Settlement currency
  - Type of settlement asset (commercial bank money, central bank money, crypto)
  - Settlement risk management measures (eg prefunding)
- 6. Foreign exchange (FX)
  - Currency conversion
  - Payment versus payment (PvP)

### Choice of currency arrangement
- Three currency arrangement types:
  - Single currency platform:
    - Transactions processed in one currency: (i) a common currency of a currency union; (ii) a national currency commonly used for international trade among connected jurisdictions; or (iii) an international reserve currency such as the US dollar or the euro.
    - Conversion from any other currency to the settlement currency is provided outside the arrangement by the payer’s PSP, the payee’s PSP and/or an international settlement bank.
  - Multicurrency platform:
    - Transactions processed in multiple currencies using account structures segregated by currency.
    - Currency conversion happens outside the platform; cross-currency transactions on the platform are not possible.
    - Participants may be able to exchange currencies with the platform when funding and defunding their accounts.
    - To transact in multiple currencies, participants need to maintain multiple settlement accounts with the platform.
  - Cross-currency platform:
    - Conversion from one currency to another takes place on the platform, allowing one connected PSP to be debited in one currency and another to be credited in another currency.
    - FX rates may be set, and liquidity may be provided, by the platform itself or by one or multiple competing third-party FX providers, which may or may not include a mechanism enabling FX transactions to be settled using PvP.
    - Participants can choose to maintain only one settlement account with the platform.
- Factors influencing choice of currency arrangement:
  - Purpose of the platform (single currency area vs fostering national currencies within an economically integrated region).
  - Liquidity of the chosen currency(ies), particularly in exchange with other currencies of interest.
  - Any exchange restrictions or other capital controls related to the currency.
  - Exchange rate regime in the relevant jurisdictions against the currency.
- Empirical note from survey: several existing multilateral platforms have recently expanded services to include more regional currencies and/or global reserve currencies.

### Effects of multilateral platforms on frictions
- Seven frictions identified as contributing to cross-border payment challenges: (i) legacy technology platforms; (ii) fragmented and truncated data formats; (iii) funding costs; (iv) long transaction chains; (v) weak competition; (vi) complex processing of compliance checks; and (vii) limited operating hours.

- Legacy technology platforms and fragmented, truncated data formats
  - Building a new multilateral platform with no pre-existing parts can address legacy friction by using the latest technology (eg avoid batch processing, include real-time monitoring, implement new payment messaging standards).
  - A new platform could implement a harmonised version of ISO 20022 to improve data quality and facilitate straight through processing (STP); this version must be implemented across all participants (direct and indirect) to avoid message conversion and associated risk of data loss.
  - APIs can help connect multilateral platforms with existing payment systems and facilitate data exchange.
  - Platforms may offer ancillary services (proxy lookup registries, fraud monitoring, pre-validation services) but each ancillary service may add complexity, costs, and potential regulatory adjustments (eg data protection).
  - Trade-off between innovation and interoperability:
    - Need to adopt latest technology while keeping technical access requirements low enough for less advanced participants.
    - Possible mitigation: ancillary services that translate messages from ISO 20022 to local formats (noting the risk of data loss).

- Funding costs
  - PSPs need to hold sufficient liquidity in all currencies in which they transact; inability to exchange funds readily can tie liquidity into individual currency pots.
  - A multicurrency platform with sufficient reach may allow participants to pool liquidity and reduce liquidity demands compared with maintaining multiple currency accounts at correspondent banks or participating in many domestic payment systems.
  - Platforms can enable participants to exchange currencies by allowing funds transfers on a 24/7 basis for FX trades off the platform or by offering an FX service on the platform (becoming a cross-currency platform).
  - Holding accounts in multiple currencies and readily exchanging currencies may assist participants in hedging FX risk.
  - Settlement model matters:
    - Deferred net settlement (DNS) is less liquidity-intensive than real-time gross settlement (RTGS) but exposes participants to credit risk and requires higher trust, which may be difficult across jurisdictions with different legal frameworks for default events.
    - A platform can require pre-funding to reduce credit risk, which may increase funding costs for participants depending on design; a prefunding mechanism could draw on assets pre-positioned but not yet pledged as collateral for intraday credit to reduce liquidity burden.
  - Multilateral platforms cannot eliminate funding costs altogether but have options to address funding issues depending on trade-offs designers accept.

- Long transaction chains
  - Multilateral platforms may shorten transaction chains by allowing participants to send and receive payments directly rather than via multiple intermediaries.
  - Long chains increase processing time and often require additional funding to cover unpredictable fees, making payments slower and more expensive.
  - Replacing some or all intermediaries and more directly connecting originating and beneficiary PSPs can reduce costs and increase payment speed.
  - Empirical note: on SWIFT gpi in September 2020, each additional intermediary in the payment chain prolonged elapsed payment time by an average of three hours; fewer than 1% of payments involved more than two intermediaries.

- Weak competition
  - A multilateral platform could allow PSPs that cannot reach each other directly to reach each other, enabling more PSPs to offer cross-border services in a corridor.
  - Onboarding a multilateral platform may be less burdensome than establishing separate correspondent banking relationships or participating in multiple domestic payment systems.
  - A widely used platform can serve as a single access point to a region and make it easier and cheaper for foreign financial institutions and other entities to transact within that region, potentially mitigating de-risking effects in certain corridors.
  - Platforms should be designed to create a level playing field between banks and non-bank PSPs to avoid disintermediation of efficient firms or raising barriers for other platforms.
  - Wider access can increase competition between payment providers, lower costs for end users, and increase financial inclusion.

- Complex processing of compliance checks
  - Platforms can provide comprehensive monitoring and transaction screening tools using a broader overview of the complete transaction chain.
  - Platform operators can monitor more transactions than any single participant and may be better positioned to detect anomalies, helping participants comply with AML/CFT regulation.
  - Detecting anomalies typically requires comparisons with relevant reference data that participants need to be able and willing to share.
  - Platforms could streamline AML/CFT compliance by limiting participation to entities subject to tighter regulation (eg those with banking licences).

- Limited operating hours
  - Operating hours must meet participant needs and depend on network model and use case.
  - For a hub and spoke platform intended for cross-border payments within a single time zone, aligned operating hours may suffice; spokes distributed across time zones require extended operating hours at the hub.
  - A common platform that also settles domestic payments may need even further extension to align with domestic business hours.
  - Multilateral platforms with intended global reach might choose to operate close to 24/7/365 from the outset to avoid misalignment across time zones.
  - Extending operating hours can mitigate the friction of limited operating hours but may increase operational costs.

*Source: anea2023001 - 2.2 Key design choices and related considerations*

### 3.  Stocktake of multilateral platforms

### 3.  Stocktake of multilateral platforms

### Overview of the stocktake
- In early 2021, the CPMI carried out a stocktake of existing and potential multilateral platforms.
- In late 2021 and early 2022, the CPMI engaged with platform operators and other entities to learn more about individual platforms.
- Collectively, these efforts revealed that, at the time the information was collected, 20 different cross-border payment systems could be classified as multilateral platforms.
- The inclusion of a platform in this report does not represent and should not be construed as an endorsement of its products or services by the CPMI, the BIS Innovation Hub, the IMF or the World Bank.
- Platforms are described across four dimensions:
  - Geographical scope: regional or global.
  - Market segment: wholesale or retail payments.
  - Type of currency arrangement: single currency or multicurrency.
  - Network model: common platform or hub and spoke.

### Regional wholesale platforms (findings)
- There are nine regional wholesale platforms identified.
- Of these nine, four are RTGS systems for single currency areas that are owned and operated by the monetary authorities (including central banks) for those currencies:
  - ECCB-RTGS by the Eastern Caribbean Central Bank for the Eastern Caribbean dollar.
  - STAR-UEMOA by the Central Bank of West African States for the West African CFA franc.
  - SYGMA by the Bank of Central African States for the Central African CFA franc.
  - TARGET2 by the Eurosystem for the euro.
- Characteristics of the four currency-area RTGS platforms:
  - Process cross-border payments between jurisdictions within their currency areas.
  - Share many similarities with national RTGS systems and function as the primary systems for domestic wholesale payments.
- The five remaining regional wholesale platforms were established through public initiatives to promote financial integration and are owned and operated by public sector entities (not necessarily central banks):
  - AFAQ, set up by the Gulf Cooperation Council to serve the Gulf region.
  - EAPS, set up by the East African Community to serve the East-African region.
  - REPSS, set up by the Central African Economic and Monetary Community to serve the Central African region.
  - SADC-RTGS, set up by the Southern African Development Community to serve the Southern African region.
  - SIP, set up by the Central American Monetary Council to serve the Central American region and the Dominican Republic.
- SADC-RTGS specifics:
  - Is a common platform run by the South African Reserve Bank.
  - Processes primarily intraregional cross-border payments denominated in the South African rand.
  - Domestic payments are handled by participating jurisdictions’ national payment systems (eg BISS in Botswana).

### Regional retail platforms and other regional initiatives
- Four regional retail platforms were identified:
  - Buna, established by the Arab Monetary Fund (AMF).
    - AMF is a public sub-organisation of the Arab League.
    - Buna has participants from 22 states in the Arab region.
    - Buna also processes wholesale payments, albeit to a lesser extent than retail payments.
  - PAPSS, established by the African Export and Import Bank (Afreximbank).
    - PAPSS has a pan-African scope, aiming to cover the entire continent.
    - Afreximbank is a public-private partnership.
  - P27, a privately owned and operated clearing system in development for retail payments in the Nordic region.
    - P27 was not established to pursue regional integration but to explore business opportunities, including cost reduction, from combining several national clearing systems.
  - TIPS, a fast payment system (FPS) for the euro among Eurosystem countries.
    - TIPS might evolve from a single to a multicurrency platform.
    - The European Central Bank, Bank of Italy and Sveriges Riksbank are exploring a possible cross-currency settlement service between TIPS and RIX-INST (based on TIPS technical platform and operated by the Eurosystem).
    - Depending on design, the combined structure of TIPS and RIX-INST could be classified as a multilateral platform.

### Global platforms and explored concepts
- The only three existing global platforms are all multicurrency common platforms:
  - CLS, which settles wholesale FX trades.
    - CLS does not settle cross-border payments for goods and services but only the underlying payment instructions resulting from the trading of various FX products.
  - Two global four-party card schemes: Mastercard and Visa.
    - Process cross-border and domestic payments primarily for the retail segment.
    - Process large volumes of payments (mostly person-to-business (P2B) and business-to-business (B2B)).
    - Have launched services for other market segments based on clearing and processing (examples include “Visa Direct” and “Mastercard Send” intended for person-to-person (P2P) cross-border payments).
- Amplus:
  - A concept by the Deutsche Bundesbank targeted at remittances.
  - Envisions central banks as direct participants holding accounts in a global multicurrency system, enabling domestic PSPs to participate indirectly and offer improved remittance services.
  - Key elements include an addressability scheme and a know-your-customer (KYC) identifier to standardise compliance processes.
- Three projects exploring wholesale CBDC-based settlement assets:
  - Project Dunbar.
  - Project mBridge.
  - Project Jura.

### Other arrangements closely related to multilateral platforms
- Project Nexus (BIS Innovation Hub Singapore Centre):
  - A global-scale project proposing linking existing FPS of multiple jurisdictions using APIs rather than establishing a common technical infrastructure.
  - The Nexus Gateway is envisioned as a hub connecting existing FPS through payment messages or APIs.
  - Could be categorised as a multilateral platform at a later stage.
- MFS Africa:
  - Enables PSPs (eg mobile money operators, money transfer operators, banks and other financial service providers) to leverage a single relationship with MFS Africa to send and receive cross-border payments to and from multiple jurisdictions via domestic or regional payment rails.
  - Can be characterised as a payment aggregator.
  - Payment aggregators serve as bridges between domestic or regional payment, clearing and settlement infrastructures by acting as single access points to foreign PSPs and may offer value added services such as currency conversion and real-time transaction monitoring.

### Uptake and potential
- Anecdotal evidence from the stocktake on platform uptake:
  - Apart from CLS, Mastercard, Visa and four platforms that serve single currency areas, the levels and growth rates of payment volumes on many multilateral platforms are low compared with the size and growth rate of the global cross-border payments market.
  - This implies most multilateral platforms have yet to reach their full potential.
  - Increased public sector support and international coordination could help extend the geographical reach of existing platforms, for example, by introducing regional integration initiatives that create an impetus for new or expanded platforms.

### Risks, barriers and challenges (overview)
- Multilateral platforms face multiple risks similar to other payment systems; those that become systemically important pose financial stability risks.
- The PFMI outline these risks and mitigation measures as well as responsibilities of regulators, supervisors and overseers (CPSS-IOSCO (2012)).
- The section lists and discusses risks particularly important for multilateral platforms: legal risk, operational risk, and illicit finance risks. These risks can lead to barriers to establishment and challenges in operation.

### Legal risk
- Legal risk: the risk of an unexpected application of a relevant law or regulation and can also arise if the application of the law is uncertain.
- Cross-border operations may present greater legal risk due to interactions between multiple statutory and regulatory frameworks across jurisdictions.
- Potential legal issues:
  - Differing protections for legal concepts like settlement finality and netting across participating jurisdictions.
  - Varying laws and regulations governing access to payment systems; access criteria for domestic payment systems may be prescribed by law or limited by risk management considerations.
  - Individual jurisdictions may impose additional regulatory requirements on foreign operators, including domestic processing mandates, foreign equity caps and data residency rules.
  - Misaligned data frameworks (eg on data protection, privacy and localisation) may conflict with value added services and act as barriers.
  - Regulatory limits on foreign direct investments and residents’ holdings of foreign currency may constrain design, particularly for multicurrency platforms.
- Implications and mitigation:
  - These legal issues can act as barriers to establishment.
  - Changes to domestic laws can alter a platform’s assessment of legal risk, potentially limiting enforcement of claims or affecting settlement finality in participant insolvency.
  - Close monitoring of local laws across relevant jurisdictions and early engagement with domestic authorities can help identify legal risk.
  - The desire for stronger regional economic integration may catalyse efforts to align regulatory frameworks and mitigate some barriers.

### Operational risk
- Operational risk: relates to deficiencies in information systems, internal processes and personnel, or disruptions reducing, deteriorating or breaking down services provided by an FMI.
- Specific operational risk considerations for multilateral platforms:
  - Common platforms are vulnerable to a single point of failure or cyber attack causing operational disruption.
  - Hub and spoke systems, with a broader range and types of participating entity, may present an even larger attack surface for cyber attacks and other operational failures.
  - Incidents may be challenging to handle with many participants involved, increasing operational complexity and potential costs.
  - Reliance on third parties (vendors, custodians, linked infrastructures, other service providers) exposes platforms to third-party performance risk.
  - Contracts and service level agreements spread across many jurisdictions may not be fully enforceable in every jurisdiction, adding operational complications.
- Implications and mitigation:
  - Platforms may pool resources, skills and knowledge from multiple jurisdictions to offer better operational risk mitigation.
  - Identifying and assessing all potential sources of operational risk during design and on an ongoing basis can help mitigate risk.

### Illicit finance risks
- All payment systems risk being used for illicit finance, including money laundering, terrorist financing and sanctions evasion.
- Multilateral platforms may allow many different types of participant, so specific risks and requirements vary considerably.
- Sanctions compliance:
  - Broadly applied and includes responsibility for compliance by financial institutions; competent authorities monitor sanctions compliance by financial institutions rather than by the multilateral platform.
- AML/CFT and messaging requirements:
  - Financial institutions are required to include necessary and accurate originator and beneficiary information on payments and related messages and to pass on information throughout the payment chain.
  - Cross-border context risks derive in part from difficulties in identifying beneficiary or originator if from a foreign jurisdiction, particularly if the platform does not enforce consistent messaging or identification standards.
- Visibility and control:
  - Multilateral platforms in theory have a broader view of transactions and could be better positioned to identify fraud, AML/CFT violations, or sanctions evasion.
  - In the hub and spoke model, the hub may not have much visibility into or control over activity initiated by spokes or indirect participants, limiting the hub’s ability to detect illicit finance risks.
- Practice and platform tools:
  - Some platforms offer screening or monitoring tools to support participating financial institutions’ AML/CFT compliance (or plan to once they have sufficient transaction volumes).
  - Many platforms leave AML/CFT compliance to their participants.

*Source: CPMI stocktake and analysis as presented in the chapter "3.  Stocktake of multilateral platforms".*

### 4.4 FX and liquidity risk

### 4.4 FX and liquidity risk

### FX volatility exposures
- Multilateral platforms are exposed to the risk of unexpected volatility in FX rates, similar to other cross-border payment arrangements.
- FX volatility may affect participants’ liquidity risk management if participants are unable to obtain enough of a volatile currency for settlement.
- Principles 7 and 12 of the PFMI further elaborate on liquidity risk and principal risk, respectively (CPSS-IOSCO (2012)).

### Platform choices and risk sharing
- A platform may choose to perform currency conversion itself by offering FX rates that are fixed for a limited period.
  - In this case the platform would share FX risk with participants and therefore would need to manage associated credit and liquidity risks.

### Liquidity provision constraints
- A multilateral platform’s ability to manage liquidity risk may be constrained relative to certain domestic systems.
  - Due to legal or operational constraints, there may be no monetary authority that can provide intraday liquidity to participants in either business-as-usual or emergency scenarios.
- Liquidity bridges between central banks and multilateral platforms could help address this problem but are currently unavailable.
  - The potential relevance of liquidity bridges depends on:
    - how other available mechanisms fulfil participants’ liquidity needs, and
    - central bank appetite and risk management considerations.
- A liquidity bridge is defined as a cross-currency intraday liquidity arrangement between two or more central banks (CPMI (2022e)).

### Mitigation options and trade-offs
- To mitigate FX and liquidity risks, a multilateral platform may:
  - Settle in a few, very liquid currencies to reduce FX and liquidity pressures, noting this could limit the platform’s usability for regional business.
  - Require participants to fully pre-fund their accounts to initiate payment transactions (reduces platform liquidity exposure).
  - Choose deferred net settlement rather than real-time settlement to reduce liquidity demands.
- Trade-offs:
  - Settling only in very liquid currencies can constrain regional/local currency use.
  - Pre-funding and deferred net settlement reduce liquidity risk but may affect services and timeliness for participants.

*Source: anea2023001 - 4.4 FX and liquidity risk*

### 5.4 Potential roles for the public sector

### 5.4 Potential roles for the public sector

### Public sector roles overview
- Public sector entities have traditionally performed three roles in payments, namely as (i) catalysts; (ii) regulators, supervisors and overseers; and (iii) operators.
- This subsection describes how the public sector in each role can promote and support the development of a multilateral platform regardless of its technical design or ownership structure.

### Role as catalyst: enabling environment and market formation
- An environment that enables or catalyses innovation is a key factor in the success of a multilateral platform; this is the main responsibility for the public sector in its role as catalyst.
- Public institutions could:
  - develop a global vision and formulate their expectations through guidelines or mandates for multilateral platforms;
  - actively coordinate market incentives and welcome new initiatives;
  - leverage existing public-private industry groups (for example, central banks convening a broad selection of stakeholders) to foster development;
  - assist in attracting enough participants for the platform to reach a scale that enables it to take advantage of network effects.
- Public sector seed financing could address positive externalities that private providers do not fully internalise, making provision more attractive for private sector stakeholders.
- Public-private partnerships or public sector involvement in governance structures may help to overcome inertia (the CLS public-private cooperation is given as an example of such support).

### Role as regulator, supervisor and overseer: framing standards and cooperative oversight
- As regulators of payment systems, public sector authorities can frame the vision of multilateral platforms within regulatory standards and assist in setting up legal and regulatory coordination (including on data frameworks) and a well founded and enforceable legal basis.
- Such adjustments to domestic regulation may increase overall costs and lengthen development timelines for a new multilateral platform.
- Risks arise if supervisory complexity is not appropriately addressed and responsibilities are not clearly defined.
- Potential benefits: greater transparency for oversight authorities due to central processing and movement of remittance settlement from unregulated to regulated channels, possibly leading to enhanced data quality and decreased risks.
- A multilateral platform requires comprehensive oversight that recognises cross-jurisdictional impact; this may require establishing new cooperative oversight and supervisory arrangements.
  - Precedent: CLS is overseen by the CLS Oversight Committee, an international cooperative oversight arrangement comprising the 18 central banks whose currencies are settled in CLS, as well as five national central banks from the euro area.
- Oversight complexity would be commensurate to the number of relevant jurisdictions involved.
- Participating authorities would likely need to:
  - agree on which jurisdiction or authority would serve as lead overseer; and
  - identify a mechanism for sharing information.
- Determining authorities’ interest in oversight and regulation of a global multilateral platform may pose challenges.
- Because of network effects and high initial costs forming a market entry barrier, a multilateral platform may develop a high degree of market concentration and might crowd out other arrangements.
  - It is critical for the public sector to closely monitor establishment and evolution to ensure participation requirements and pricing policies support fair and open access, and governance arrangements uphold policy objectives of fair competition and interoperability.

### Role as operator: operational implications and safeguards
- In a hub and spoke platform with central bank systems as spokes, central banks may need to adjust operating hours, messaging standards and access criteria; these changes could affect system costs and create disincentives for public operators to join a global platform.
- If the public sector operates a global multilateral platform, more significant changes in central banks’ operational role may be required (including risk tolerance and risk management), which authorities may be reluctant to undertake.
- Overarching principle: public initiatives should avoid crowding out private ones if sound governance and fair competition can be guaranteed.
- Public sector platform operators may explore rationale, conditions and safeguards to enable PSPs of a non-member jurisdiction to access services of a multilateral platform where legislative and regulatory frameworks allow.
- Depending on platform design, central banks may play roles as:
  - settlement agents;
  - providers of accounts and other banking services; and/or
  - providers of liquidity bridges to ensure the flow of sufficient liquidity in the supported currencies.
- New global multilateral platforms would be expected to operate 24/7 or adopt an incremental approach to a 24/7 operating schedule, which has implications for central bank operations.

### Monitoring, competition and access considerations
- Public sector monitoring should ensure that participation requirements, pricing policies and governance arrangements support:
  - fair and open access;
  - fair competition;
  - interoperability.
- Where appropriate, public sector involvement in governance and oversight can help address risks, barriers and challenges—especially in the startup phase where decisive public leadership may be required.

*Source: anea2023001 - 5.4 Potential roles for the public sector (Exploring multilateral platforms for cross-border payments – January 2023).*

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_Source: https://www.imf.org/-/media/files/publications/analytical-notes/2023/english/anea2023001.pdf_