US Federal Reserve is not convinced of “fast” cross-border payments
MUMBAI: The US has reservations about the international linking of domestic fast payments such as the UPI make global transactions faster and cheaper.
“Today, consumers and businesses in general can make payments anywhere in the world, but they all seem to want faster and cheaper global payments, just as we want ever faster flights and cheaper airfares. However, I am not entirely convinced that interconnecting these agreements will necessarily achieve those goals,” said Christopher J. Waller, member of the Board of Directors of Federal Reserve System.
“There is no silver bullet that will increase speed and efficiency without compromise. Unless new solutions are found, linking fast payment systems could increase the risk management burden on the banks involved. That said, legal, compliance and operational considerations are critical to the discussion on the opportunities and challenges of linking,” said Waller, speaking at the Global Fintech Fest here on Wednesday.
The Fed has launched its own rapid payment network, FedNow Service. “We are still at the beginning of a multi-year process to build a ubiquitous network that covers the majority of institutions in our country. The global variation in the use of domestic rapid payment networks means that the value of globally connected systems is not yet clear,” Waller said.
The governor said the technical feasibility and legal issues could be managed as some bilateral agreements have shown, but any linkage requires complex negotiations and bilateral links are impractical for global scale. While multilateral structures offer efficiency, they are still resource intensive. RBI Managing Director P Vasudevan, however, remained confident that the fast payments between India and the US could be linked. “They have given us positive hope that the linkage between FedNow and UPI will happen, even though it might take some time,” Vasudevan said, adding that it will make remittances cheaper and faster.
“Today, consumers and businesses in general can make payments anywhere in the world, but they all seem to want faster and cheaper global payments, just as we want ever faster flights and cheaper airfares. However, I am not entirely convinced that interconnecting these agreements will necessarily achieve those goals,” said Christopher J. Waller, member of the Board of Directors of Federal Reserve System.
“There is no silver bullet that will increase speed and efficiency without compromise. Unless new solutions are found, linking fast payment systems could increase the risk management burden on the banks involved. That said, legal, compliance and operational considerations are critical to the discussion on the opportunities and challenges of linking,” said Waller, speaking at the Global Fintech Fest here on Wednesday.
The Fed has launched its own rapid payment network, FedNow Service. “We are still at the beginning of a multi-year process to build a ubiquitous network that covers the majority of institutions in our country. The global variation in the use of domestic rapid payment networks means that the value of globally connected systems is not yet clear,” Waller said.
The governor said the technical feasibility and legal issues could be managed as some bilateral agreements have shown, but any linkage requires complex negotiations and bilateral links are impractical for global scale. While multilateral structures offer efficiency, they are still resource intensive. RBI Managing Director P Vasudevan, however, remained confident that the fast payments between India and the US could be linked. “They have given us positive hope that the linkage between FedNow and UPI will happen, even though it might take some time,” Vasudevan said, adding that it will make remittances cheaper and faster.
