A member of the European Central Bank’s executive board recently expressed concerns regarding high cross-border payment costs, despite reductions in IT and telecommunications expenses.

Cross-Border Payment Costs

Speaking at the Regional Governors’ Meeting, Piero Cipollone highlighted an example to illustrate this issue: a small business owner in Croatia sending €5,000 to a supplier outside of the EU’s Single Euro Payments Area (SEPA) in a Western Balkan country might face fees up to 12 times higher than those for intra-SEPA transfers.

Although SEPA has expanded since its launch in 2018, with Montenegro, Albania, and North Macedonia set to join this year, fragmentation within the EU continues to pose a barrier to growth.

Enhancing Cross-Border Payment Systems

Given the broader challenges in cross-border payments, Cipollone proposed linking existing real-time payment systems across borders to build a better system. This would reduce costs and increase speed and transparency while also avoiding the need for payment service providers to deal with multiple payment systems or chains of correspondent banks.

Targeting Cross-Border Payment Systems

The core idea behind Cipollone’s proposal is the EU’s TARGET Instant Payment Settlement (TIPS) service, which operates within SEPA. He suggested adding a currency exchange function to TIPS so that real-time payments can start in one TIPS currency and settle in another.

Initially, this would cover the euro area, Sweden, and Denmark, and could later expand globally through frameworks such as Project Nexus, established by a central bank consortium including the Bank for International Settlements. The project aims to connect payment systems in South and Southeast Asia, starting with India, Malaysia, Thailand, Singapore, and the Philippines.

After these steps, the ECB plans to further develop safer, more accessible alternatives that make global payments cheaper, faster, and more transparent without compromising integrity, stability, or sovereignty.