US treasury official applauds India’s UPI system for advancing international payment systems

India’s UPI system: Jay Shambaugh also discussed ongoing explorations in various jurisdictions into the future of money and payments. This includes experiments with cross-border Central Bank Digital Currencies (CBDCs) and distributed ledger technology (DLT)-based payments.

SUMMARY

• Shambaugh, who serves as the Under Secretary of the US Treasury for International Affairs, delivered a speech at Harvard Law School
• He discussed the role of new technologies in cross-border payments
• He commended India’s UPI system, which has recently forged strong bilateral ties with Singapore and UAE

A US treasury official, Jay Shambaugh, highlighted India’s Unified Payments Interface system (UPI) for its remarkable efforts in strengthening bilateral connections with other nations, such as Singapore and the United Arab Emirates. Shambaugh, who serves as the Under Secretary of the US Treasury for International Affairs, delivered a speech at Harvard Law School, discussing the role of new technologies in cross-border payments.

During his speech, he highlighted the aspirations of a group of ASEAN countries to collaboratively link their fast payment systems. In this regard, he pointed out that numerous initiatives are already in progress to modernise outdated payment systems. Payment service providers, system operators, banks, and financial market infrastructures (FMIs) are making significant investments to enhance the speed, affordability, transparency, accessibility, and efficiency of their systems for both individual users and the financial sector.

Shambaugh further highlighted the global adoption of the ISO 20022 messaging standard, which offers enhanced data richness and facilitates seamless payment processing with faster messaging, reduced payment failure rates, and other advantages. In particular, he praised India’s efforts in fostering bilateral ties by connecting its Unified Payments Interface system with those of other countries like Singapore and the United Arab Emirates.

He also discussed the broader ambition of ASEAN countries to interconnect their fast payment systems on a multilateral basis. In both scenarios, the “G20 Payments Roadmap” has played a pivotal role in directing initiatives toward realising tangible and near-term progress. Shambaugh stressed that one of the primary focus areas of this G20 roadmap is “payment system interoperability and extension,” which aims to enhance payment system connectivity and operational alignment along key corridors.

He noted that achieving this goal allows for instant transfers and settlement of payments across different systems. Monitoring efforts associated with the G20 Roadmap have already begun to yield positive outcomes, even in the upgrade of legacy systems predating the G20’s payments work.

Additionally, Shambaugh discussed ongoing explorations in various jurisdictions into the future of money and payments. This includes experiments with cross-border Central Bank Digital Currencies (CBDCs) and distributed ledger technology (DLT)-based payments. While acknowledging the potential of these technologies to revolutionise payment systems, he also cautioned that the actual implementation might be more complex.

“In theory, new technologies in this space present the opportunity of a fresh start for payment systems, although the reality may be more complex. In an idealised vision, we could use these technologies to design cross-border payment systems with all of the beneficial features of legacy systems, plus some additional features that legacy systems do not provide,” he said.

“These additional features might include transparency of costs and institutions in the payment chain; atomic, instantaneous settlement; and programmable payments. Together, these functionalities could help achieve our two core goals of increasing efficiency while reducing risk,” said the US treasury official.

With Thanks Reference to: https://www.businesstoday.in/technology/news/story/us-treasury-official-applauds-indias-upi-system-for-advancing-international-payment-systems-402541-2023-10-19