MUMBAI: The US has expressed reservations about the international linking of domestic fast payments like the UPI to make global transactions faster and cheaper.
“Today’s consumers and businesses can generally send a payment anywhere in the world, but they all seem to want faster and cheaper global payments, just like we always want faster flights and cheaper airfares.However, I am not entirely convinced that interlinking arrangements will necessarily deliver on those goals,” said Christopher J Waller, member of the board of governors for the Federal Reserve System.
“There is no silver bullet that increases speed and efficiency without trade-offs. Unless new solutions are found, interlinking fast payment systems might increase the risk-management burden for banks that participate in them. That is, legal, compliance, and operational considerations are critical to the discussion of the promise and challenges of interlinking,” said Waller. He was speaking at the Global Fintech Fest here on Wednesday.
The Fed has launched its own fast payment network FedNow Service. “We are still at the beginning of a multiyear journey of establishing a ubiquitous network covering the majority of institutions in our country. Variation around the world in domestic fast payment network adoption means that the value of globally interlinked systems is not yet clear,” said Waller.
The governor said technical feasibility and legal issues can be managed as some bilateral arrangements have shows, but each link needs complex negotiations and bilateral links are impractical for global scale. While multilateral setups offer efficiencies, they are still resource-intensive. However, RBI executive director P Vasudevan was still hopeful of linking India-US fast payments. “You have given a positive hope that we will see the linkage happen between FedNow and UPI even if it may take a little while,” Vasudevan said, adding that it will make remittances cheaper and faster.
“Today’s consumers and businesses can generally send a payment anywhere in the world, but they all seem to want faster and cheaper global payments, just like we always want faster flights and cheaper airfares.However, I am not entirely convinced that interlinking arrangements will necessarily deliver on those goals,” said Christopher J Waller, member of the board of governors for the Federal Reserve System.
“There is no silver bullet that increases speed and efficiency without trade-offs. Unless new solutions are found, interlinking fast payment systems might increase the risk-management burden for banks that participate in them. That is, legal, compliance, and operational considerations are critical to the discussion of the promise and challenges of interlinking,” said Waller. He was speaking at the Global Fintech Fest here on Wednesday.
The Fed has launched its own fast payment network FedNow Service. “We are still at the beginning of a multiyear journey of establishing a ubiquitous network covering the majority of institutions in our country. Variation around the world in domestic fast payment network adoption means that the value of globally interlinked systems is not yet clear,” said Waller.
The governor said technical feasibility and legal issues can be managed as some bilateral arrangements have shows, but each link needs complex negotiations and bilateral links are impractical for global scale. While multilateral setups offer efficiencies, they are still resource-intensive. However, RBI executive director P Vasudevan was still hopeful of linking India-US fast payments. “You have given a positive hope that we will see the linkage happen between FedNow and UPI even if it may take a little while,” Vasudevan said, adding that it will make remittances cheaper and faster.
