Money moves without borders. Why can’t our payments data do the same?

Having spoken to many transaction banking leaders at Sibos last week, there was no hotter topic than cross-border payments. This is a major piece of the puzzle the financial services industry needs to resolve to bring down costs, increase speed, provide wider access and improve transparency.

Cross-border payments are no longer just about moving money – they are about moving data. All of the challenges associated with international payments today derive from how clients and payments data is accessed and shared. The big question is: how do we share data across borders safely, efficiently and without giving compliance teams a collective heart attack?

At a Sibos panel on data sharing, I was joined by four financial services professionals who live and breathe domestic and international payments. Together, we explored the promise and challenges of data sharing in this context and discussed current practices, domestic examples and potential solutions to improve data sharing worldwide.

“Clients want to be able to move money when they want, how they want, to anywhere in the world. Speed, certainty, visibility and certainly security are some of the key things that I believe clients are truly looking for,” says Danielle Sharpe, managing director for FI clearing products, transaction banking at Standard Chartered Bank. “And, of course, as we get faster and as we do have more access to different real-time payment schemes, instant schemes around the world, as things move quicker, fraud and crime is also moving quicker.”

Striking this balance between streamlined transactions and robust security measures has proven to be one of the most complex hurdles to overcome.

Data sharing, while integral to modern banking, especially in cross-border payments, remains a multifaceted challenge for financial institutions.

Edward Metzger, vice president for payments efficiency at LexisNexis Risk Solutions, explains that data sharing is fundamental in cross-border payments. Each transaction inherently involves multiple organisations exchanging information to complete a payment, from the identity of the sender to the destination of the funds.

“What we really mean as an industry when we talk about these challenges is data sharing of additional data that enriches the transaction,” says Metzger. This means sharing information necessary for compliance, fraud prevention and security – without compromising data privacy regulations or operational efficiency. This emphasis on compliance reflects the industry’s broader struggle with protecting against fraud while maintaining the integrity and speed of cross-border payments.

Several countries have made strides in improving domestic data sharing to enhance security and reduce fraud, creating models that might offer lessons for international frameworks.

Stuart Bailey, head of payments industry regulation at Lloyds Bank, points to the UK’s Confirmation of Payee initiative, a service launched in 2019 to confirm a beneficiary’s account information before a transaction proceeds. This system, Bailey notes, has drastically reduced fraud, performing “two million confirmation checks a day” and extending to more than 400 UK-based payment service providers.

Beyond improving customer security, Bailey observes that setting such a regulatory standard spurred innovation in data handling. “Once you set the standards and rules of the game, you see real innovation,” he says. Verification technologies, application programming interfaces and other tools have flourished, creating a more secure domestic environment that has reduced errors and enhanced the customer journey.

Meanwhile, in Japan, Mizuho Bank has seen benefits from its own rigorous approach to data sharing, according to Misao Watanabe, who represented Mizuho and the Japanese Banking Association. Japan’s longstanding local payment systems have evolved with data-sharing protocols that “pop out the account holder’s name on the screen” to prevent mistakes, an approach implemented more than two decades ago to enhance transaction accuracy. Watanabe says that these standards have created a “consensus” around data sharing in Japan, illustrating how domestic systems can foster a culture of transparency.

However, transferring these domestic solutions to an international stage brings its own set of challenges, particularly as regulatory landscapes differ widely across borders. Watanabe highlights the challenges faced by Mizuho’s global operation in sharing data across different countries within the bank’s own 40 branches and subsidiaries. He explains that while there is a desire to centralise information to enhance collaboration among colleagues, various international regulations create significant obstacles. Specifically, Mizuho must comply with Japanese laws and the local regulations in each country it operates in, which can often conflict. This regulatory complexity forces the bank to limit data sharing between offices and even within teams, leading to delays and restricted access to valuable information.

“We are a globalised world,” Sharpe remarks, “but... we’re certainly not getting any closer” in terms of universal data-sharing protocols.

And, according to a poll around 200 people in the audience at this panel, data privacy was by far the main challenge associated with data sharing in cross-border payments.

According to Metzger, at the domestic level, banks primarily want to share data that would help reduce fraud and improve compliance while respecting privacy laws. Within domestic markets, data sharing often focuses on fraud prevention, specifically in areas like authorised push payment fraud and scam detection. Banks want to share information that can help identify patterns associated with fraudulent activities, enabling them to act quickly and prevent losses.

Metzger gives an example of LexisNexis’s ThreatMetrix, a fraud database where banks contribute anonymised data in exchange for access to a shared resource. This allows institutions to identify accounts or transactions associated with fraud in a secure, privacy-compliant manner. Banks want data-sharing solutions that protect customer privacy while offering the insights necessary to create a safer and more streamlined payment environment.

Bailey highlights the “creative tension” between the data that must be included in a payment message and the data needed for compliance checks before sending the payment. He noted that as payments move toward structured data formats – such as ISO 20022 – there is an increasing need to gather and validate information upfront to meet regulatory and compliance requirements. This tension has led to the development of new validation processes around data assurance.

“Suddenly, the payments department is the data assurance department for the whole organisation,” says Bailey, pointing out that the complexity of data requirements affects multiple areas, including upstream processes, customer interactions and reference data management. As a result, this “creative tension” has cascading effects across the bank’s operating model, emphasising the importance of accurate data preparation and validation in the payments journey.

Sharpe explains that correspondent banks repeatedly check the same data in cross-border payments due to compliance requirements and the complexity of different regulations across countries. She notes that each country has unique payment systems, regulatory frameworks and stages of technological development, which means that compliance checks often cannot be standardised or skipped. With Standard Chartered operating in 53 markets and participating in 37 clearing schemes, she emphasises that each jurisdiction adds its own layer of regulatory requirements and nuances.

Sharpe also highlights that while there might be hope for a system where banks could rely on prior checks done by upstream institutions in the payment chain, the level of trust and cooperation required for this approach is not yet in place. As a result, each bank along the payment journey feels the need to perform its own compliance checks to ensure security and regulatory adherence. To optimise this, she suggests that advancements in data standards, such as ISO formats, and potentially third-party aggregators, could help harmonise data handling. However, she acknowledges that further progress in trust, regulatory consistency and data architecture alignment is still needed across the industry.

The Financial Stability Board (FSB) has recently completed a public consultation on cross-border data sharing, which aimed to address the regulatory challenges in global payments. Watanabe says he welcomed the FSB’s recommendations, which he described as “ambitious and essential for improving regulatory harmony across countries”.

The FSB’s key recommendations, Watanabe explains, focus on encouraging countries’ regulatory authorities to work together toward greater “regulatory harmonisation.” The recommendations include creating public-private forums and standardising regulations, which would also involve minimising data localisation requirements to facilitate smoother cross-border transactions.

He emphasises that the proposed framework is designed to allow broader, more consistent data sharing across borders, which the industry views as crucial. Watanabe expresses optimism, saying that these recommendations, if implemented, could make a meaningful difference in overcoming regulatory fragmentation in cross-border payments.

As the panel looked at solutions to bridge these regulatory divides, both Metzger and Bailey suggested that technology could provide an answer. Metzger suggested that while regulatory changes are in progress, banks can take practical steps to address current data-sharing challenges. He emphasises the importance of leveraging existing solutions and data sources to manage data quality and compliance. He points out that banks can use publicly and commercially available data to ensure standardised information in ISO message formats, thereby improving data quality within the current ecosystem.

Additionally, Metzger says that banks can adopt a “coalition of the willing” approach, where they use available data-sharing solutions – such as name verification services – that may not cover all markets but collectively provide substantial benefits. He recommends focusing on what is achievable with today’s tools and data sources, even if they are partial solutions, while the industry waits for regulatory frameworks to align with these needs.

Bailey suggests that new data structures and standards are paving the way for improved connectivity between systems. He points to a UK initiative, called Payments Substitutability, that aims to allow different payment flows within various schemes to substitute for one another, enhancing system resilience.

Bailey also noted the emergence of bridging services that link separate “walled garden” payment systems, creating a new industry focused on interoperability. He suggested that organisations like Swift could play a significant role in connecting local payment schemes by offering services such as bank account verification to streamline data flow between systems. Overall, Bailey expresses optimism that the industry is making tangible progress toward a more interconnected payment ecosystem, which should facilitate smoother cross-border transactions.

And Sharpe shares examples of collaborative efforts among banks and payment schemes, particularly in Asia. She highlights how Singapore has extended its PayNow instant payment service to work with Indonesia, creating a cross-border remittance system for low-value transactions. This partnership between Singapore and Indonesia demonstrates how bilateral agreements can enable cross-border data portability and payment interoperability.

Sharpe also points to a project in Singapore known as COSMIC, a collaboration between five local banks and the Monetary Authority of Singapore. COSMIC aims to allow banks to share information when they suspect financial transactions are linked to criminal activity. This initiative reflects how banks and regulators can come together to enhance domestic data sharing for specific purposes, such as fraud prevention.

While these initiatives are promising, Sharpe acknowledges that they primarily address lower value transactions and specific regulatory goals, such as crime prevention. She expresses a need for broader, more scalable solutions that could support higher value cross-border payments across multiple jurisdictions.

And in the absence of a global regulatory framework for data sharing, there is also a role to play for Swift, technology vendors and other non-bank organisations. Metzger explains that these third-party aggregators can facilitate secure, privacy-compliant data sharing by acting as intermediaries. For example, he notes that banks are often more comfortable sharing data with a trusted third party than directly with other banks, provided that strict legal and risk management standards are upheld.

Metzger also notes the potential of hashed databases, where data is anonymised, allowing institutions to share relevant information without revealing personally identifiable information. By aggregating data and supporting shared resources, Metzger argues, Swift and vendors can offer solutions that help banks prevent fraud and enhance customer experience without breaching privacy regulations.

However, broad adoption is critical here as third-party solutions are most effective when they are widely used across financial institutions. Swift and vendors should focus their efforts on gaining industry-wide participation to ensure that their platforms offer comprehensive coverage and reliable data-sharing mechanisms for cross-border payments.

This Sibos panel underscores the complex interplay of regulation, technology and cooperation necessary to transform cross-border payments through effective data sharing.

Collaboration in tackling the shared challenges of data sharing and cross-border payments is critical to success. Although financial institutions may compete in the market, when it comes to data sharing and improving payment systems, they “need to be in this together”, says Sharpe.

Banks, fintechs and payment service providers need to work collectively, as everyone is dealing with similar regulatory, compliance and data privacy challenges. Ultimately, data sharing holds not just commercial advantages but global economic benefits, potentially contributing up to 2.5% of the world’s GDP, according to the World Economic Forum.