Equens and Fed Banks join forces on cross-border payments

As banks lick their wounds in the wake of the subprime crisis and assess which transaction-related businesses they wish to remain in, the Federal Reserve Banks in the US and European payments processor Equens have joined forces to provide a low cost channel for processing payments between Europe and the US.

Cross-border payment volumes are relatively low compared with domestic payments and have high fixed costs associated with them. The new cross-border service will provide a standardised channel for processing low-value payments in multiple currencies, including the USD and euro, and forms part of the FedGlobal ACH Services that were announced at the Payments 2009 conference in Orlando, Florida recently.

Both Equens and the Federal Reserve Banks are part of the International Payments Framework, which aims to use the latest industry standards that are part of the Single Euro Payments Area (SEPA) to increase efficiency and lower cost in the processing of global cross-border low value payments.

While the announcement by Equens and the Federal Reserve Banks is geared towards banks looking for a more cost efficient channel for processing low value cross-border payments, some banks will not be happy about ACHs treading on their toes or challenging traditional cross-border business models.