Stablecoins have pinned their corporate finance hopes on a straightforward proposition: better cross-border B2B payments. Traditional cross-border payments are constrained by banking hours, fragmented data and layers of intermediaries. Digital dollars, by contrast, can move continuously across programmable networks.
But the future of that sales pitch took a hit at the G20 meeting this week (Aug. 31-Sept. 1) in Asheville, North Carolina, where finance ministers and central bank governors effectively responded with a different idea: What if the banking system simply fixed those things?
“We call on countries to advance initiatives to expand large-value payment system operating hours, encourage use of the harmonized ISO 20022 data model, and facilitate the cross-border transmission of financial services-related data while considering data security and domestic legal frameworks,” wrote the G20 ministers and bank governors in the meeting’s opening statement.
While none of those measures individually sounds revolutionary, together, they point toward the key areas where the incumbent financial system is beginning to address some of the structural deficiencies that gave alternative payment rails their opening.
See also: Banks Make Their Move in Cross-Border Payments
Central Banks Are Fixing the Three Cross-Border Frictions Stablecoins Exploit
Cross-border B2B payments already account for the majority of global stablecoin payment volume, according to findings in the July edition of the Payments Innovation Tracker® Series, a PYMNTS Intelligence collaboration with Paymentology.
But stablecoins did not become interesting to corporate payments simply because blockchains were novel. They became interesting because they offered an alternative architecture for dealing with three stubborn problems: time, information and interoperability.
Cross-border banking still operates partly according to the schedules of the systems connecting institutions. Transactions crossing currencies and jurisdictions can encounter operating-hour mismatches, cutoffs and periods when settlement infrastructure is unavailable. The G20 specifically called for initiatives expanding the operating hours of large-value payment systems. The closer those systems move toward overlapping or continuous availability, the less valuable “always on” becomes as a differentiator by itself.
The second issue is information. ISO 20022 allows significantly richer and more structured information to travel with financial messages than older messaging formats. For businesses, the significance goes beyond messaging modernization. Structured information can help software understand what a payment represents, which invoice it belongs to, who sent it and what should happen when it arrives.
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The G20’s third priority of facilitating cross-border transmission of financial-services data could make that information more useful across jurisdictions, although governments will still need to reconcile those ambitions with privacy, security, localization and other domestic requirements. And, ultimately, if liquidity can move for more of the day, payment instructions can carry richer standardized information and software can automatically act on that information, banks begin addressing several of the frictions that have made stablecoins attractive for B2B payments without requiring corporate money to leave the regulated banking perimeter.
The September edition of the The Real-Time Payments World Map, a collaboration with The Clearing House, explores the latest developments shaping the evolution and expansion of instant payments in Asia-Pacific and around the world.
See more: Currency Just Became Treasury’s Newest Superpower
Stablecoins Still Have an Important Card to Play
None of this makes stablecoins redundant. The G20 acknowledged the potential of digital financial innovation and digital assets while calling for regulatory frameworks that support innovation and preserve financial stability. It also noted forthcoming Financial Stability Board work examining the cross-border implications of global stablecoin arrangements.
“Money moves on weekends” is powerful when competing infrastructure does not. It becomes less powerful as operating windows expand. “Payments are programmable” matters less when conventional payment messages become sufficiently structured for software to automate the processes surrounding them.
The PYMNTS Intelligence report “The Cross-Border Opportunity: How Payments Innovation Can Help SMBs Go Global” found in May that while traditional banks remain the dominant provider for international payments, FinTech companies are expanding their role by combining faster digital experiences with services designed for businesses navigating global trade. Rather than replacing banks, many small- to medium-sized businesses (SMBs) appear to be building a broader payments tool kit as international commerce becomes more common.
As settlement windows expand and financial data becomes richer and more portable, transportation starts becoming infrastructure. The valuable question, then, moves upward: Who decides how the money should move?
That puts routing, liquidity optimization, compliance automation, reconciliation and payment orchestration closer to the center of competition. Stablecoins become another powerful instrument available to that intelligence layer rather than necessarily its replacement for banking.
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