Mumbai: Praising India’s tech-driven payment revolution, United States member Board of Governors of the Federal Reserve System, Christopher J Waller on Wednesday said that it was the result of a successful public-private partnership that helped broaden financial inclusion at low costs.
“I spent 3-4 hours yesterday at the NPCI (National Payments Corporation of India--the founder and manager of UPI), learned a lot about UPI and how it is done,” Walker said at the Global Fintech Fest 2024.
“India’s UPI has shown how a public-private partnership can expand financial inclusion and cut costs,” he added.
He however expressed reservations about the international linking of domestic fast payments such as UPI to make global transactions faster and cheaper. According to Waller, frictionless cross-border payments will make it difficult to check money laundering and terror funding.
Waller’s comments are in dissonance with the Reserve Bank of India (RBI) governor Shaktikanta Das who have advocated for a globally interoperable cross-border payment system developed by India, namely the UPI (unified payments interface). India has been making concerted efforts to expand the international reach of the UPI including via interlinkage with the fast payments systems (FPSs) of other countries. Currently, UPI is functional in seven countries: Bhutan, France, the UAE, Singapore, Nepal, Sri Lanka, and Mauritius. “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,” he said.
Not all frictions that slow payments down are bad, he said, asserting that certain frictions are purposely built into the global payment system for compliance and risk-management reasons, Waller said. “Slowing down the speed at which payments are cleared and settled helps banks prevent money laundering and counter the financing of terrorism, detect fraud, and recover fraudulent or misdirected cross-border payments,” Waller said.
“There is no silver bullet that increases speed and efficiency without tradeoffs,” he warned. “Unless new solutions are found, interlinking fast payment systems might increase the risk-management burden for banks that participate in them.”
Waller said that the US is prioritizing the development of its internal FedNow network in the near to medium term. FedNow is an instant payment system developed by the Federal Reserve that currently connects 1,000 depository institutions, including many of the nation’s largest banks.
Addressing the same gathering of financial and technology experts, RBI governor Das said that efforts are on to make UPI and RuPay "truly global", as he outlined focus areas of the central bank going forward. The central bank governor said that the RBI’s focus is on financial inclusion, deepening digital public infrastructure (DPI), consumer
protection and cyber security, sustainable finance and global integration of financial services.
India is engaged actively in international fora and bilateral agreements to foster economic cooperation with many countries going forward, and strengthening financial infrastructure, including cross-border payment systems, will be the RBI's key focus areas, he added.
Das said India, with its tech talent and evolved financial fintech ecosystem, holds the potential to serve as a global hub for digital innovation and fintech startups, building and strengthening strategic partnerships, reinforcing commitment to international cooperation, and developing institutions of excellence.
Referring to the fintech sector, he said the segment attracted about USD 6 billion in investments in the last two years.
“India’s UPI has shown how a public-private partnership can expand financial inclusion and cut costs,” he added.
He however expressed reservations about the international linking of domestic fast payments such as UPI to make global transactions faster and cheaper. According to Waller, frictionless cross-border payments will make it difficult to check money laundering and terror funding.
Waller’s comments are in dissonance with the Reserve Bank of India (RBI) governor Shaktikanta Das who have advocated for a globally interoperable cross-border payment system developed by India, namely the UPI (unified payments interface). India has been making concerted efforts to expand the international reach of the UPI including via interlinkage with the fast payments systems (FPSs) of other countries. Currently, UPI is functional in seven countries: Bhutan, France, the UAE, Singapore, Nepal, Sri Lanka, and Mauritius. “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,” he said.
Not all frictions that slow payments down are bad, he said, asserting that certain frictions are purposely built into the global payment system for compliance and risk-management reasons, Waller said. “Slowing down the speed at which payments are cleared and settled helps banks prevent money laundering and counter the financing of terrorism, detect fraud, and recover fraudulent or misdirected cross-border payments,” Waller said.
“There is no silver bullet that increases speed and efficiency without tradeoffs,” he warned. “Unless new solutions are found, interlinking fast payment systems might increase the risk-management burden for banks that participate in them.”
Waller said that the US is prioritizing the development of its internal FedNow network in the near to medium term. FedNow is an instant payment system developed by the Federal Reserve that currently connects 1,000 depository institutions, including many of the nation’s largest banks.
Addressing the same gathering of financial and technology experts, RBI governor Das said that efforts are on to make UPI and RuPay "truly global", as he outlined focus areas of the central bank going forward. The central bank governor said that the RBI’s focus is on financial inclusion, deepening digital public infrastructure (DPI), consumer
protection and cyber security, sustainable finance and global integration of financial services.
India is engaged actively in international fora and bilateral agreements to foster economic cooperation with many countries going forward, and strengthening financial infrastructure, including cross-border payment systems, will be the RBI's key focus areas, he added.
Das said India, with its tech talent and evolved financial fintech ecosystem, holds the potential to serve as a global hub for digital innovation and fintech startups, building and strengthening strategic partnerships, reinforcing commitment to international cooperation, and developing institutions of excellence.
Referring to the fintech sector, he said the segment attracted about USD 6 billion in investments in the last two years.