Fed Governor Waller is calm about linking fast payment systems

editorial

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Connecting fast payment systems is a component of the G20 roadmap to promote cross-border payments. Several countries have entered into bilateral agreements, while many more are experimenting, including through BIS projects.

However, speaking at an event in India, Waller warned against the push for ever faster cross-border payments.

“Not all frictions that slow payments are bad. Certain friction points are intentionally built into the global payments system for compliance and risk management reasons. Slowing down the speed at which payments are processed and settled helps banks prevent money laundering and counteract financing, “fight terrorism, detect fraud and recover fraudulent or misdirected cross-border payments,” he told his audience.

Additionally, buyers often have an incentive to wait as long as possible to pay for a purchased product.

Waller says: “So I’m still left with the bigger question of whether we should incentivize faster cross-border payments.”

The governor also noted the practical complications of linking systems, pointing out that Brazil, India and the US all have very different models.

Waller warns that “achieving interoperability is not easy” and that “the technology is probably the easiest part,” compared to the legal, compliance, settlement and governance challenges.

In summary, Waller says he does see value in a coordination role for the public sector to improve cross-border payments.

However, “Our main focus in the short to medium term is to continue to expand the FedNow network domestically and increase participation in the service.”