International payments: Current alternatives and their drivers

As the traditional correspondent banking network is shrinking and becoming more concentrated due to increasing regulatory requirements, new alternatives for international payments have emerged in recent years. On the one side, there are payment platforms such as AliPay, PayPal and AribaPay; on the other, there are token-based solutions such as Bitcoin. Announced in June 2019, Facebook’s Libra initiative represents a culmination of these novel approaches. This paper will review the current alternatives for international payments and the drivers behind these developments. The paper adopts a taxonomy to characterise money in the digital age and extends this in order to compare the different solutions. Three main dimensions can be applied to distinguish the concepts: tokens versus accounts; proprietary/closed-loop versus interoperable; and settlement-based versus messages between local pools. While no current alternative could completely replace the existing system for the time being, close monitoring of the way forward and more research will be needed to derive more insight into this complex challenge.