Federal Reserve governor Christopher Waller has cautioned against the clamour to interlink national fast payment systems, insisting that the US is focused on building up its FedNow network domestically.
The interlinking of fast payment systems is a plank of the G20 roadmap for boosting cross-border payments. Several countries have put bilateral agreements in place while many more are experimenting, including via BIS projects.
However, in a speech at an event in India, Waller warned about the drive for ever faster cross-border payments.
"Not all frictions that slow payments down are bad. Certain frictions are purposely built into the global payment system for compliance and risk-management reasons. 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," he told his audience.
Not only this, but buyers often have an incentive to wait as long as they can to pay for something they have purchased.
Says Waller: "So, I am still left with the larger question of whether we should be incentivising faster cross-border payments."
The governor also highlighted the practical complications of linking systems, noting that Brazil, India and the US all have very different models.
Waller warns that "achieving interoperability is not simple," and that "technology is probably the easiest part," compared to the legal, compliance, settlement, and governance challenges.
In conclusion, Waller says he does see value in a coordination role for the public sector to improve cross-border payments.
However: "Our chief focus in the near-to mid-term, however, is continuing to build the FedNow network domestically and increasing participation in the service."