Today’s cross-border payment innovations, designed to meet the rapidly growing demand for global non-urgent transactions (ACH, SEPA, etc.), were not magically born out of thin air by a raft of Fintech and bank wunderkind. Instead, this evolution has its roots in the pioneering work done more than two decades ago by a group of professionals who saw the future and were intrepid in laying the groundwork for the successes we enjoy today.

At the time, a consortium of leading banks and clearing houses engaged in a project called WATCH, with the goal of creating a global automated clearing house network to meet the expanding need for non-urgent, cross-border transactions. However, it quickly became apparent that developing and implementing such a plan with differing views and requirements would be exceedingly challenging, and the project was shelved.

Some time passed, and a forward-thinking group of global payments leaders, clearing houses and technology vendors (now called FinTech’s) from across continents and oceans came together to address this continued unmet need. “This time, we are getting it done…” I recall saying to Jane Hennessy, my co-leader of what was then called the International Payments Framework (IPF). This initiative was sponsored by Nacha, the U.S. Payments Association.

The IPF engaged in an attempt to address the burgeoning demand for a global service for non-urgent payments. The group included Jan Estep at the Nacha CEO helm, Jane Hennessy from Wells Fargo, yours truly at J.P. Morgan, and Priscilla Holland, a leader at Nacha who ran a tight ship and kept us all in line.

The IPF set about creating rules, standards, operating procedures, and guidelines designed to improve cross-border payments. IPF was similar to the Single Euro Payments Area (SEPA), in that both initiatives aimed to facilitate international payments, based on ISO 20022 standards, and involved mostly banks as their main participants. IPF went further than SEPA, reaching globally, involving more public entities, banks from small to large, clearing houses and central banks. This was truly an attempt at democratizing the cross-border business. Another difference was that the IPF developed a “bridge” that allowed existing national standards to communicate with each other, rather than replacing them with a new paradigm.

As more international participants joined the steering committee and work groups, driving the mission forward, the IPF invented key translation technologies, and ultimately was spun off from Nacha to become a company called the IPFA. The “A” noting a company in the business of connecting the world for non-urgent payments. The U.S. leaders were joined by industry leaders from around the world, including Dr. Elizabeth McQueery, Joachim Kavakama, Arthur Cousins, Henrik Parl, David Chance, Michael Steinbach, Roland Boeff, and Paul Trozzo.

I just want to call out the leadership of the late Elliott McEntee, who while at Nacha set the bar high and had the talent to bring all of us along for the journey. Elliott was a driving force behind innovations that have made U.S. ACH what it is today – a simple and safe system that reduces systemic risk, paper check inefficiencies, and fraud. As a result of his efforts, ACH in the U.S. has been able to achieve massive growth.

The Goal of the IPFA Framework

Once formed, the IPFA developed a non-urgent cross-border credit transfer capability that enabled participating institutions to exchange international ACH payments more effectively.

The IPFA recognized that getting countries around the world to change standards and business practices would be a challenging gambit. Instead, the best approach would be the development of a common standard that would achieve straight-through-processing (STP) for transactions involving members who joined the service. Speaking of standards, it’s important to note that SWIFT served as strong advocates for the then new ISO 20022 standard. We thank Jim Wills from SWIFT, who was instrumental on the technical side of IPFA rules and standards. This work was made possible because of the engagement of regulators around the globe, who embraced the vision of the IPFA.

The IPFA was responsible for the creation of the aforementioned Nacha-ISO-XML bridge, which paved the way for many of the innovations we see today. In a world before cloud computing and APIs, these innovations were significant and broke the dam for many new use-cases for ACH payments internationally.

These capabilities also enabled the Southern African Development Community (SADC) to provide real-time cross-border payments using mobile phones. The Federal Reserve and Equens (now called equensWorldline) used the IPFA bridge for transactions between approximately 30 European countries and the U.S. ACH network. This story is personal for me in that the honor of working with the IPFA also brought a start-up called Earthport into our membership ranks. Ultimately, Earthport became, at that time, the world’s largest independent ACH network. This enabled customers to gain new levels of predictability, transparency, and cost-efficiency, without intermediary deductions.

The synergies with Earthport were compelling, ultimately leading to Visa acquiring this business. The acquisition became part of our Money Movement strategy – from cards to accounts to wallets for businesses and consumers. Today, our Money Movement strategy has not only acquired Earthport, but led us to the acquisitions of YellowPepper and Currencycloud.

Boldly Forging the Payments Landscape of Tomorrow

Innovations of the past have laid the groundwork for where the payments landscape is today, and where it is heading tomorrow. As business models evolve to solve emerging and shifting customer demands, the need for bolder and faster solutions continue to be part of our strategic ethos for our financial institutions and their clients. We often refer to the overall strategy as the network of networks.

Next-generation payment solutions are emerging to serve all types of businesses and governments, including small, mid-market and large corporate/enterprise companies. Among the innovations impacting the payments space, cloud infrastructures are reducing the costs of building critically important applications. At the same time, Open Banking APIs are enabling greater flexibility, driving ease-of-use, control, and use-cases beyond our imagination today.

Distributed ledger/blockchain technologies are being used to power digital currencies, such as stablecoins and central bank digital currencies (CBDCs), which hold potential to provide even more choice and alternatives in the cross-border B2X payment experience. Another innovation is embedded finance, as applied to the mid-to-large corporate segments, which until now has been too complex to address. API, cloud computing, and open banking innovations support embedded finance through account opening, lending, and of course, payments, to name a few. These advances in placing financial credentials inside of non-financial platforms, such as Enterprise Resource Platform software infrastructures, will make the end-to-end payments experience more streamlined, adding significant value and ease to users. Remember, in the next couple years, millennial and GenZ generations will make up the majority of our workforce. They will have lived a truly all digital life. Their expectations for consumerized services and ease-of-use will be table stakes!

Digitization and artificial intelligence (AI) are fostering tremendous improvements in efficiency and security around payments operations (e.g., reconciliation, reporting/analytics, fraud detection, routing, etc.). When digital payments and AI are combined, it becomes possible to remove much of the friction and cost that manual approval processes create. Expense management and transaction rules handled by AI and machine learning tools make it possible for transactions to be processed quickly and seamlessly. And with the introduction of Large Language Models/Generative AI, all types of reports and other reconciliation processes can be automated, further reducing process friction and reducing cost and the need for manual intervention.

Driving working capital capabilities is essential for the growth of an addressable market in the trillions for banks and its clients. The use of virtual payments to drive Days Payable Outstanding extensions (DPO) and Days Sales Outstanding (DSO) enhancements enables suppliers to be paid faster, while allowing buyers to enjoy capabilities only network (card) rails can offer. The solutions are delivered digitally by randomized credentials by Visa and its Bank issuers, in partnership with suppliers and merchant acquirers. Embedded finance also will provide more direct transparency into true payment type performance versus the silo effect in today’s paradigm. Thinking ahead to the next horizon is part of our culture, which is also evidenced in our buying, building, and partnering with world class companies. Visa’s B2B Connect is a great example of the commitment fulfilled in delivering a brand-new network designed for high value and data payload transactions. We understand the payment is an outcome of the relationship between buyers and suppliers and bank capabilities like trade services are now turning to B2B Connect to provide near real time settlement/data, dramatically reduce cost, and provide a deduct free/full value payment experience for the beneficiary, delivered end-to-end by our member banks for its clients. The on-network experience is multilateral with no intermediaries driving visibility, safety and security.

From Past to Future

The innovative cross-border payments solutions that are revolutionizing the way international business is conducted today owe much of their success to the work of leaders who envisioned a better way. The groundwork of the IPFA has been instrumental in bringing about a much more robust cross-border payments landscape. And for that, we should all be grateful.