Two years can be a long time, or, depending on what you're trying to accomplish, barely enough time to get started.

Back in 2024, the WTO and a group of multilateral development banks made a commitment to expand supply chain finance in emerging markets. Two years later, we've worked with seven of those institutions to take stock of how those commitments are doing. Our latest publication, Two Years of Progress in Supply Chain Finance (which is linked below), is the fruit of those labours, and well worth taking a read through. There are some encouraging signs of progress, although plenty of work remains. 

Speaking of the work that happens behind the scenes, our latest coverage from Nairobi follows the paper trail through Kenya's digital trade system. The country has made impressive progress in digitalisation, but exporters can still find themselves waiting for manual approvals and carrying physical documents between parties. More on that in our latest TTP Studios release below.

Our slow read, meanwhile, takes us back to Miami for a look at the big questions facing transaction banks. At BAFT's Global Councils Forum, which took place in the lead-up to Sibos, interoperability was flagged by some as a bigger priority for correspondent banking than stablecoins or new clearing channels. Our recap article from the event also touches on how banks and their customers in the Middle East have been adapting to disrupted trade routes.

Elsewhere, there's plenty happening in the world of finance. Zvilo is taking its SME working capital offering to South Africa, Ripple and BNY are expanding their work on digital assets, and treasury providers are pushing further into the world of 24/7 liquidity. Take a scan, and if something jumps out to you, give it a read or a watch!

Until next time — remember, progress is a work in progress.

— Carter Hoffman, Deputy Editor

Country of the Week: Dominica

Did you know that Dominica shares its currency with seven other Caribbean countries and territories? The Eastern Caribbean dollar is used across eight members of the Eastern Caribbean Currency Union, including Antigua and Barbuda, Grenada, and Saint Lucia. Managed by a common central bank, the currency has been pegged to the US dollar at EC$2.70 to US$1 since 1976, giving these small island economies a shared monetary framework for trade and payments.

Dominica trade stats (2024):

Slow Read

Trends, priorities and challenges shaping transaction banking

Participants at the BAFT meeting in Miami discussed how correspondent banking and cross-border payments are being remodelled, the impact of AI and resilience in the Middle East.

In the face of geopolitical instability, greater compliance pressures, accelerating digitalisation and more sophisticated cyber-attacks, transaction banks are having to navigate an increasingly complex landscape while growing their business, supporting clients and out-manoeuvring new entrants.   

The recent BAFT Global Councils Forum, held on September 27 in Miami ahead of Sibos, brought together more than 150 senior leaders to discuss how the global industry is rising to the challenge, as well as share insights and best practice. Tackling the big issues such as where agentic AI will add value in transaction banking and the remaining gaps in cross-border payments, the half-day event prepared attendees for the hot topic discussions during Swift’s user conference.

With new 24/7 payment rails and emerging value forms, such as tokenised assets, the future of correspondent banking was top of the agenda. In a session about whether the existing network was fit for purpose, panellists discussed the challenges of legacy bank technology and financial market infrastructure, non-standard implementation of ISO 20022 and data requirements, and the lag in regulation compared to the fast pace of change in the market.

A straw poll found that most of the audience believed that interoperability would have the biggest impact on corresponding banking in the next three to five years, more than clearing channels, stablecoins and compliance economics.

Interoperability is often cited as a major challenge to scaling digital asset markets, due to ecosystem fragmentation, trapped liquidity and operational complexity. “Every financial institution can issue a token, but what about interoperability? Creating a solution where a token issued by Citi is accepted by Wells Fargo, for example, is not an easy feat,” said Sebastien Kucharek, Head of Global Clearing, Citi.

The opportunity to move value within the same currency or between currencies with the use of tokenised deposits also requires interoperability between digital assets and fiat, Kucharek added, to avoid burdening the customer with technical complexity. “A customer doesn’t care if we are moving money using a tokenised deposit or fiat. What really matters is whether we can do it fast, cheaply and without friction,” he said. 

Visa is looking at enabling stablecoins as a source of liquidity for its clients, as well as enabling stablecoin payouts to stablecoin wallets where this is required, according to Sandeep Gupta, Head of Global Partner Network, Visa Direct. Visa has modernised its multi-country treasury operations by leveraging tokenised deposits and stablecoins. “Our treasury is using tokenised deposits with certain banks, as we pay to around 125 countries and need to position liquidity in different places,” he said.

Earlier this month, Visa announced that Inyo Global, a payments infrastructure provider, has brought Visa Direct’s stablecoin-enabled prefunding into production, making stablecoin-powered transactions available for businesses that run cross-border payments through Visa Direct.

Ainsley Ward, Vice President, Payments Consulting Services, CGI, looked at the problem of cross-border payments through a different lens. He was the technical solution designer of the Bank for International Settlements’ Nexus network, now called Nexus Global Payments, which links together domestic real-time systems and settles domestically on both sides, effectively eliminating foreign exchange risk.

“If you’re not making money move, then you don’t have a problem with moving money,” he explained. “As we go through this change in cross-border payments, which underpins all of our cross-border networks and global trade, Nexus is trying to fix the problem in a way that makes sense.”

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