Today, the BIS’s Committee on Payments and Market Infrastructures (CPMI) released a report on how multilateral platforms could address cross-border payment frictions. The document mentions 20 separate platforms, most of which use conventional technologies and are in production. It also includes three CBDC cross-border payment platforms that are still under development and all use blockchain.

However, the document does not mention other private DLT initiatives such as Fnality, Partior or Baton Systems.

The three cross-border CBDC platforms referenced are Project MBridge, Project Dunbar, and Project Jura, which involve the BIS Innovation Hub, which co-authored the report along with the IMF and the World Bank.

Most existing multilateral platforms are regional, with only three global ones in production: CLS, Visa, and Mastercard.

Benefits of multilateral platforms

Multilateral platforms allow payments without using correspondent banking. Thus, they reduce the friction, time, and costs of engaging intermediary banks for international payments. Shortening the transaction chain by reducing intermediaries also makes compliance easier and cheaper.

Other benefits include lower funding costs by having a larger liquidity pool on the platform. Enabling alternative payment routes could also improve competition because more payment service providers can send payments directly.

Center and radius versus common platform

The report describes two approaches to creating a multilateral payments network. One is to use a hub and spoke model, and the other is to share a common platform. The raison d’être of a hub-and-spoke model is to interconnect national payment systems.

Put simply, with the hub and spoke model one only has to agree on a common set of APIs for interconnection on a technical level. By contrast, for a common platform, the participants would have to agree on almost all aspects of the platform and its functions.

While it is recognized that a deal is likely to be challenging, on the other hand, this type of common platform solution could be less complex and therefore easier to maintain more efficiently. Because changes to a hub and spoke model must consider the impact on each connection of the payment system (spoke).

Another benefit of a common platform is a more consistent level of service. For example, each national network may have different participation criteria, some restricted to banks. By contrast, for a common platform, the same criteria would probably apply worldwide.

All DLT solutions are common platforms, both CBDC and private.

The report also highlights several challenges with multilateral platforms, many of which have been raised in previous cross-border CBDC reports.