JPMorgan Joins BIS Cross-Border Payments Project Using Digital Currencies

Some of the world’s biggest banks and payments firms are teaming to rethink cross-border payments.

As Bloomberg News reported Wednesday (Sept. 18), the Bank for International Settlements (BIS) has recruited the likes of JPMorgan Chase, Deutsche Bank, UBS, Visa and Mastercard for its Agora project.

That project, first announced in May, explores the development of an international tokenized asset trading platform that would use digital currencies backed by the central banks. It would let investors trade across borders using “virtually risk-free central-bank money,” the report adds.

“Given the high level of interest in Project Agora and its large scale, the BIS chose to work with the Institute of International Finance to convene the private sector participants,” project lead Morten Bech told Bloomberg. “This collaboration was very helpful in being able to complete the selection and onboarding process in a timely manner.”

According to the report, Agora is the largest and most complex effort out of a number of projects BIS is exploring for enhancing the world’s financial system.

It “has the potential to lay the foundation for a new regulated financial market infrastructure to facilitate cross-border payments,” the BIS said on its website. “This is about improving, via technology, what central and commercial banks already do today and enabling greater speed and efficiency.”

Writing about this topic last week, PYMNTS noted that cross-border payments are hampered by inefficiencies like high fees, slow settlement times and poor transparency, making international transactions cumbersome and expensive.

For instance, consumer cross-border payments often incur bank fees averaging more than 11%, which can eat away at the value of smaller transactions. B2B payments are affected as well, with fees averaging 1.5% and processing delays up to several weeks. Almost half of Citibank’s corporate clients say high costs are a pain point, while 59% cite slow speeds as an issue.

“The lack of transparency in traditional payment systems worsens existing challenges. In 2023, U.S. eCommerce firms experienced an 11% failure rate in cross-border transactions, resulting in $3.8 billion in lost sales,” PYMNTS wrote.

Pinpointing the root cause of failure can be difficult, thus impeding recovery efforts and erasing customer trust, and underlining the need for a more efficient and transparent payment solution.

“Blockchain technology offers transformative potential to address these issues by streamlining processes and reducing costs,” that report said.

The PYMNTS Intelligence report “Can Blockchain Solve the Cross-Border Payments Puzzle?” examined how blockchain could transform cross-border payments, while also assessing its current adoption and exploring the future implications for financial institutions and businesses.