christopher j waller : interlinking fast payment systems speech by mr christopher j waller, member of the board of governors of the federal reserve system, at the global fintech fest, mumbai, 28 august 2024. * * * thank you to the conference organizers for the opportunity to speak this year at the global fintech fest - a place where there is so much payments innovation. 1 the technology - driven payments revolution in india has been enabled by a public - private partnership to build the " technology stack " of digital platforms that has broadened financial inclusion and done so at low costs. 2 building on the foundation established by the public sector, innovators in the private sector seized the opportunity to enhance payments through the introduction of new capabilities that alleviate frictions while remaining within regulatory guardrails. in today's remarks, i am going to touch on how interplay between the public and private sectors may be the key to advancing crossborder payments. now that fast payment systems have been established around much of the globe - in over 70 countries and climbing - attention is turning to how these newer systems could potentially enhance global payments. specifically, interlinking fast payment systems has been identified as a possible means to deliver enhanced cross - border payments for consumers and businesses. interlinking arrangements would allow banks in different countries who are users of domestic fast payment systems to send payments to each other through technical connections between their respective domestic systems. as you all know, interlinking is one of the areas outlined in the g20 roadmap for further exploration as part of a holistic effort to enhance cross - border payments. the overarching g20 goal is to mitigate challenges with cross - border payments in a coordinated way at a global level, with input from key stakeholders including the private sector. the g20 roadmap addresses a new topic that payments industry stakeholders have been circling around for years - more cost - effective and timely cross - border payments for consumers and businesses. this policy goal has been advanced by the federal reserve over time in various payment system improvement initiatives, dating back to the late 1990s when the federal reserve began adapting the automated clearinghouse ( ach ) service to support international payments, and more recently in 2015 when we collaborated with industry to improve the payment system. 3 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

private sector established the digital public infrastructure that enabled broad adoption. in the united states, it's a different story, and the payments landscape is unique. with over 9, 000 depository institutions and different authorities than other countries, the federal reserve determined that it needed to build a fast payment system accessible to all depository institutions to achieve our policy goals. at the time of our decision, there was only one private - sector instant payment system in the market, built by the largest banks. based on our experience, we did not believe that this system would ultimately reach all depository institutions, nor would other private - sector systems emerge to compete with it and extend the scope of that service. yet we knew from industry engagement that smaller banks across the country wanted a broadly accessible fast payment system, so we stepped in to address the clear coordination problem. this action is very much consistent with the federal reserve's role in the u. s. payment system historically. we have seen widespread adoption of the fednow service in just a little over a year since implementation, with close to 1, 000 depository institutions on the network including many of the largest banks that will drive origination volume. yet 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. from a technical perspective, the promise of interlinking, which is essentially interoperability between or among domestic fast payment systems, is that fast payment networks can just " connect "'with each other and move payments globally. it sounds simple. in practice, however, achieving interoperability is not simple. technology is probably the easiest part. the legal, compliance, settlement, and governance challenges i mentioned earlier are more substantial. in addition, even when technological connections are in place, payments may not actually be instant as they traverse across systems because of domestic variations in iso 20022 implementation, which is the global standard used by most fast payment systems. to send an iso message seamlessly from one country to another across a technical link, operators need to coordinate and align on common practices. 3 / 4 bis - central bankers'speeches we should consider that new multilateral arrangements for interlinking could potentially address some of the challenges that i have outlined. today, certain countries have established bilateral links between domestic fast payment systems primarily to support remittance payments. these