–new pact with Bank for International Settlements creates avenue for open source technology for faster, inclusive payment systems
THE Inter-American Development Bank (IDB) and the Bank for International Settlements (BIS), on Thursday, signed their first-ever collaboration agreement to promote financial inclusion in Latin America and the Caribbean through innovative financial technology instruments.
The signing took place within the framework of the informal ministerial meeting of the European Union’s Economic and Financial Affairs Council (ECOFIN) in Santiago de Compostela, Spain.
The historic agreement, signed by IDB President, Ilan Goldfajn and BIS Director General, Agustín Carstens, will enable the development of innovative financial public goods. It will also enable technical assistance and training in financial technology, studies, and sharing of best practices.
The first project under the agreement is the Fully Scalable Settlement Engine, or FuSSE, which is already under development. It offers central banks open-source technology that will facilitate and enhance payment systems, as well as respond to the banks’ needs in various markets, such as securities clearing and settlement.
With a modular format, the tool will give each central bank the flexibility to choose which elements to implement. The IDB’s experience in public policy and institutional capacity will be an important part of the collaboration, accompanying the development of technology.
In addition to responding to the technical needs of specific central banks and other interested parties, the IDB-BIS effort will make it possible to advance the harmonisation of regional market practices and regulatory convergence, providing a regional public good, amplifying the scale of the market, and resolving relevant issues, such as remittances.
“The role of new technologies is key to creating a consolidated network of fast and efficient payment systems and others across the region at minimal cost,” President Goldfajn said.
“This can help promote financial inclusion, create regional integration and reduce poverty in Latin America and the Caribbean. We need to have a secure market infrastructure to support development,” he said.
“I am very happy to start this partnership today, bringing together the complementary competencies and strengths of the BIS and the IDB,” said Agustín Carstens.
“Financial-market infrastructure technologies are complex and expensive. So, creating a community with the region’s central banks to develop project FuSSE has the potential to enhance these infrastructures and make the whole financial system work better.
“We look forward to gaining new perspectives as part of this collaboration, and to working together to develop new use cases and design solutions,” added the BIS general manager.
According to a recent study by the IDB and the Financial Data and Technology Association (FDATA), reducing consumer-entry barriers and promoting greater convenience and accessibility to personalised products and services are essential to advancing financial inclusion.
The report sets creating a regulatory and institutional framework, training human talent, and boosting technological capacity as public policy priorities.
The signing of the IDB-BIS agreement took place during the high-level dialogue on Financial Inclusion in Latin America and the Caribbean: a Perspective from the Financial Market Infrastructure, a roundtable that brought together the president of the IDB; the director general of the BIS; the governor of the Bank of Spain, Pablo Hernández de Cos; and ministers of finance and governors of central banks from Latin America and the Caribbean. (IDB)
