Payments Politics: Cross-Border Systems in a Fragmenting World

Cross-border payments are no longer defined solely by cost and speed, and the intertwining of payments and politics will not be undone quickly. Next-generation payments must be designed to withstand shocks that can arise from anywhere. A perception that the US is abusing its financial leverage can accelerate the very diversification it means to punish. 

Swap lines and offshore clearing support large banks and corporates, while cross-border real-time payment systems benefit individuals and small- and medium-sized enterprises. Both are needed for effective and inclusive payment systems. Many stablecoins have centralized chokepoints. Where they both concentrate exposure to the USD and diversify the pathways for currency flight, economies could realize the worst of both approaches.

This report explores how next-generation cross-border payment systems can build resilience through self-reliance, domestic real-time rails, and cross-border solutions built around corridors of real demand, rather than from the top down. Even efficiency-first rails can contribute to resilience. Countries should not rely on their richer or larger peers to build payment rails on their behalf.