Payment innovations can change the international monetary system, says IMF head

Fintech Festival 2020 last week, indicated that while digital payments can have huge global implications, there are four cornerstones needed to build the digital future.

This she said included, firstly and secondly, private sector innovations and the public sector’s involvement.

“The private sector is best able to gauge the needs of people and businesses, provide the diversity of products and services they want, and take the risks necessary for innovation. But we must ensure these risks do not translate into risks to end-users or the financial system, and we must avoid other pitfalls, such as monopoly power, or underserving vulnerable people,” the IMF head said.

She added that the IMF strongly encourages allow innovation and start-ups to flourish, while achieving essential goals: protection and privacy for consumers, countering money laundering and other crimes, and providing stability and resilience for all,” she said.

She added that lawmakers and regulators should be given the resources to succeed and stay ahead of the curve as they will need to be far-sighted and collaborative given the wide ramifications of new payments.

And just as money crosses borders, so too must regulatory efforts.

Georgieva further indicated that The Financial Stability Board, with IMF support, recently offered a roadmap to enhance cross border payments, but much work lies ahead to implement it.

“The nations of the world created the IMF to help them guide the international monetary system and make it an engine of growth for everyone. At a time when the risk of further divergence between rich and poor has increased, we recognise that responsibility has never been greater,” she said emphasising the importance of international co-operation in the building of the digital future.

“As digital money becomes more widespread, effects will ripple around the world. These include domestic currencies being swapped for more enticing foreign currencies, reduced monetary policy effectiveness, and circumvention of capital account restrictions,” she further indicated.

“So we must tread courageously, and carefully. We must ensure that payments evolve to meet user needs while remaining safe and resilient at the micro level. At the macro level, we need to foster a financial sector and international monetary system that are efficient and trusted, equitable and inclusive, and still dynamic,” Georgieva said.