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Informist, Thursday, Aug 29, 2024

--RBI official: Bringing efficiency to cross-border payments a priority

--RBI official: Lack of transparency, costs mar cross-border payments

--RBI official: Slow transactions speed a pain in cross-border payments

--CONTEXT: RBI fintech dept chief general manager at Global Fintech Fest

MUMBAI - The Reserve Bank of India is emphasising the importance of bringing efficiency to the cross-border payment space, Suvendu Pati, chief general manager, finTech department, Reserve Bank of India, said today. "Bringing efficiency to the cross-border payment space is a priority, which has been well-recognised," he said at Global Fintech Fest here. 

This focus is not only acknowledged by the G20 but also recognised by the Committee on Payments and Market Infrastructures, he noted. Pati identified several challenges in cross-border payments, including slow transaction speeds, high costs, and insufficient transparency.

On the issue of transaction speed, he said improvements are feasible given advancements in domestic fast payment systems. "The speed of money transfer from one to the other is really slow, it can be improved, and given the development in the domestic fast payment systems, this expectation is something that we can look at, and it's becoming real," Pati said. 

Regarding high costs, Pati highlighted efforts to enhance cost efficiency in cross-border remittances. He noted that the costs associated with these transactions are compounded by multiple intermediaries and additional layers in the settlement process.

"The high costs that are typically associated with cross-border remittances and especially the number of hops that are associated with the cross-border remittances. So the cost of the hops or the additional hops that you create, add to the layers of cost and the number of intermediaries that you get added to the entire settlement process". He further explained that reducing these costs would benefit both businesses and individuals.

On the issue of transparency, Pati acknowledged that despite technological progress, there remain problems with tracking the movement of money from sender to recipient. "So the cost of payment, there is inadequate transparency...Despite all technological advances, there are still issues with regard to that," Pati said.
 

Cross-border payments were a key use case for the wholesale e-rupee before its pilot launch in November 2022. As of Mar 31, the RBI reported that 2.05 bln in wholesale e-rupee was in circulation. In October, the central bank also introduced a wholesale e-rupee pilot to facilitate interbank call money trade, in addition to the earlier use-case of government securities trade.  

Speaking at the same event on Wednesday, US Federal Reserve Board of Governors Member Christopher Waller spoke about the risks of enabling fast cross-border payments, as has been the case with domestic 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," he said.  End

Reported by Sachi Pandey

Edited by Vandana Hingorani

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