By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Fabio Panetta said on Tuesday that inefficiencies in cross-border payments are becoming a broader test of whether the global economy can remain interconnected amid rising geopolitical tensions, while urging coordinated reforms at both global and national level.
In a speech at the Embassy of Italy in London, Panetta, who heads the Banca d’Italia, said that cross-border payments remained “the most glaringly unfinished business of financial modernization”, noting that while domestic systems had become faster, cheaper and available around the clock, international payments were still slow, costly and fragmented.
He said that this gap was no longer purely technical, but reflected deeper structural and geopolitical challenges. “This is no longer just a test of financial efficiency,” he said, adding that it is increasingly a question of whether the global economy can stay connected in a context of growing strategic rivalry.
Remittances to low- and middle-income countries reached around $650 billion in 2024, with costs still high—sometimes exceeding 10% for small transfers—effectively acting as a “shadow tax” on migrants’ income, he said.
Bringing costs down to the 3% target set by the G20 and the United Nations could save between $7 billion and $22 billion annually, he added.
On stablecoins, Panetta said their appeal was understandable, but noted that evidence of their efficiency remains inconclusive.
Explaining the root causes of inefficiencies, Panetta pointed to the complexity of operating across jurisdictions, currencies and time zones, as well as fragmented technical standards, declining competition in correspondent banking and high foreign-exchange costs.
He said progress under the G20 roadmap had been meaningful, particularly in harmonizing standards and expanding access, but acknowledged that key targets on cost, speed, transparency and access had yet to be achieved.
Panetta also warned that payment infrastructures were increasingly shaped by geopolitical developments, noting that sanctions and the rise of alternative systems highlight how payments can become tools of economic strategy.
“This raises the risk of fragmentation,” he said. “A proliferation of parallel systems – weakly connected or politically segmented – would reduce interoperability, increase costs and erode the efficiency gains the G20 Roadmap seeks to deliver, particularly for low-income countries.”
He argued that these developments raised questions about the capacity of the G20 Roadmap to retain the political support and relevance it needed.
“The answer is not to retreat behind parallel systems,” Panetta said, calling instead for stronger international cooperation alongside national reforms.
He urged countries to develop national action plans focusing on strengthening domestic payment infrastructures, improving regulatory frameworks and safeguarding global interoperability.
