Introduction
The present international financial environment is marked by growing needs for faster as well as more efficient cross-border payment systems. Nonetheless, Christopher J Waller, a member of the US Federal Reserve Board of Governors, opined that outcomes may not always be achieved even by intertwining fast payment systems across countries. While addressing the Global Fintech Fest in Mumbai Waller expressed his concern for the fact that while the concept of touching cross-border transactions with the least complexities is fascinating much lies in it which defines much difficulty including fighting money laundering and terror financing.
In what is called Cross-border payments
Today’s secure global marketplace allows consumers and business people to transfer payments to almost any corner of the globe. But still, certain needs have not been met, namely, the demand for fast and cheap cross-border transactions. However, Waller pointed out that there is a possibility that the optimism to assume that the interconnecting of domestic fast payment systems will by itself solve these concerns might be misplaced. He explained that not all the challenges associated with the payment process are negative since some of them are intentional to help to check on compliance issues among other risks.
Everything You need to know about Compliance and Risk Management
Waller noted that some of the delays in the payment processing process are very useful, useful for combating money mules, combating the financing of terrorism, fraud prevention, and the identification of stolen, lost, or fraudulent payments. It is incorrect to view these built-in reconciling frictions as necessary for preserving the international financial system. He said that raising the prospects of cross-border transactions beyond these issues might increase the risk management challenge for banks.
Different Ideas towards the Fast Payment Systems
Waller’s statement comes in the wake of the Reserve Bank of India (RBI) Governor Shaktikanta Das’s repeated call on the interconnectivity of Indian payment systems at a faster pace to cut the cost and time to conduct transactions between the countries. Das pointed out that this was important as a design consideration for achieving better interoperability where elements such as Fast Payment Systems and Central Bank Digital Currencies (CBDCs) are deployed.
But Waller noted that it is essential to understand that there is no sheer solution that will help one to become faster and, at the same time, not slower while working. He stated that even though the integration of the payment systems may sound very simple, it is much more than that.
Problems In Linking Up Fast Payment Systems
From a purely technical point of view, interlinking or, in other words, establishing a connection between domestic fast payment systems sounds simple and easy. However, Waller claimed that the legal, compliance, settlement, and governance issues that are linked with such integration are remarkable. He said that while fundamental technology can be easily solved, it is much more difficult for the legal and operational solutions associated with it.
Waller also pointed out that even though some countries have formed cross-border relations between their Domestic Fast Payment systems for remittance purposes, it would not be easy to expand this model all over the world. There could be some gains from multilateral arrangements but these arrangements are complex and need large coordination and monitoring.
Conclusion
There is a proposal to link domestic fast payment systems to eradicate the resolution of cross-border payment challenges; this is a sweet thought that has some real-life complications. While it is important to achieve interoperability in healthcare it is not an easy task to do so as noted by Christopher J. Waller due to the factors that accompany the process hence the challenge of balancing between speed, security, and compliance. There is no one-stop solution to the problems of cross-border payments as the world’s economic structure goes through changes.
