New FSB recommendations push for regulatory consistency in cross-border payments

New FSB recommendations push for regulatory consistency in cross-border payments - Trade Treasury Payments

The Financial Stability Board (FSB) has published a new set of recommendations to make the regulation of cross-border payments, a space long dominated by traditional financial institutions but seeing a growing presence of non-bank entities, more consistent globally.

These non-bank operators (such as fintech firms and wallet operators) are offering increasingly fast, low-cost alternatives, giving consumers and businesses broader access to international payment tools.

Such developments have come with advances in digital infrastructure that are changing how funds move across borders, but this evolution has outpaced the regulatory frameworks designed to govern them.

While banks remain subject to robust international prudential standards and financial market infrastructures fall under the purview of established global principles, the same cannot be said for the non-bank sector. As it stands, there is no single globally agreed-upon framework to oversee how payment services are delivered to end-users or to address the unique risk profiles of non-bank PSPs operating in cross-border contexts.

All providers, bank and non-bank alike, are expected to comply with the anti-money laundering (AML) and counter-terrorism financing (CTF) standards that are laid out by the Financial Action Task Force (FAFT). However, when it comes to operational oversight, the regulatory approaches used can vary widely between the different jurisdictions involved. This fragmentation has raised questions around regulatory equity of the cross-border systems.

This is why the FSB is advocating for proportional oversight that depends on the nature of the risks involved. The organisation’s December 2024 policy package encourages regulators to reassess current frameworks to ensure that similar services carrying similar risks are subject to comparable treatment, regardless of whether a bank or a non-bank offers them.

At the heart of the recommendations is the notion of functional neutrality. Rather than defining obligations based on the institutional nature of the provider, the FSB is calling for regulatory parity that focuses on what services are delivered and the risks they introduce into the system. Under this model, licensing rules, supervisory expectations and enforcement mechanisms should align with the scale, scope and structure of the PSP in question. The regulations also emphasise ensuring that consumers are adequately protected, particularly in an environment where digital payment methods are changing as quickly as they are.

Another central pillar is cross-border cooperation. With PSPs increasingly operating trans-nationally, the FSB is urging authorities to expand information-sharing arrangements and coordinate their supervision where appropriate to give regulators a more complete picture of any emerging risks.

Although the recommendations are high-level and designed to be adapted to local conditions, they aim to strengthen consistency without stifling innovation.

The latest guidance is part of a broader international effort, building on the G20 Roadmap for Enhancing Cross-border Payments, that complements initiatives already underway at the central bank and supervisory levels.

FSB’s push for regulatory convergence is a sign of the urgent need to modernise how global payment systems are governed. Further details are available through the Financial Stability Institute’s FSI Connect platform.