On RR Ep 39: Money and Payments: The Decade Ahead
By Ajay Shamdasani, host, Regulatory Ramblings Podcasts *
Click the photo to listen to RR Episode 39 with Yesha Yadav
Recently, I had the pleasure of speaking with Yesha Yadav for HKU’s Regulatory Ramblings ** podcast. The topic was what the future holds for the nature of money and payment systems ***. Yesha is a professor of law at Vanderbilt University.
When Bloomberg News was founded in 1990, Michael Bloomberg gave the agency’s first editor-in-chief, Matthew Winkler, one primary goal: to tell the story of money in all its forms. The thinking went that if they successfully did that, they would pretty much describe the entirety of the human condition. Midway through the third decade of this century, we should view the importance of payment systems and financial technologies writ large in a similar light (it would be highly useful for those that have not viewed my conversation with Dr. Bryane Michael in episode #34 to get a sense of how Generation Z has little to no say in the financial infrastructure that undergird the world they inherit.
While Yesha and I discussed a great deal on money, who has it and how they get to pay in our slightly less than an hour-long though nonetheless engaging talk (full 55-minute chat), what deeply resonated with me were her views on the topic of financial inclusion. Even as the volume of digital payments has scaled up since the millennium, there are still some serious inefficiencies underlying the current payments system apparatus globally – and especially when it comes to transfers within the US dollar system, broadly defined.
For example, as Yesha pointed out, even as the user experience in the US and much of the world has become digital through tools such as smartphones, settlement can often take several days. The system, as she noted, is clearly, at the very least, underinclusive – communities of color continue to use cash extensively owing to a lack of affordable banking services. Meanwhile, for businesses, especially small and medium enterprises, international US dollar payment transfers are very expensive and can take arduously long – often resulting in delays and a deep, systematic costs on those sending US dollar funds transfers overseas on a regular basis.
Next comes whether such digital payment solutions are even viable, notwithstanding the ample promise of a better tomorrow that advocates of such technologies continue to promise. Stablecoins are increasingly touted in the broader FinTech public debate, yet they come with their own risks as they are claims against private issuers – currently, all of whom are non-banks – and so, there is a risk they may not be safe. Despite the seamless nature of e-payments, no technology can be seen as a panacea.
To that end, regulatory policy needs to be coherent on making sure robust standards exist across borders so that businesses globally can be part of transnational stablecoin networks. It is precisely that coordination and clarity which does not exist, as Yesha and I concluded towards the end of our discussion.
When it comes to cryptocurrencies, US regulatory policy does not seem to be tilting towards enabling widespread uptake, thus favouring the current state of affairs which benefits traditional modes of payment which disproportionately favours the legacy banking system.
Indeed. CBDCs come with many uptake and buy-in issues; these primarily deal with suspicions about government data collection, surveillance through payment systems and a lack of trust in the competency of state actors to oversee large-scale payments systems in many developed jurisdictions.
* Ajay Shamdasani, a Hong Kong-based veteran in writing and research, holds degrees in history and government (AB, Ripon College), law (JD and MIPCT, University of New Hampshire Franklin Pierce Law School), and financial regulation (LLM, Chicago-Kent College of Law, Illinois Institute of Technology). Ajay is part of the HKU Reg/Tech Lab team promoting 'Digital Finance, Financial Inclusion and Sustainability: Building Better Financial Systems'.
** Regulatory Ramblings podcasts is brought to you by The University of Hong Kong - Reg/Tech Lab, HKU-SCF Fintech Academy, Asia Global Institute, and HKU-edX Professional Certificate in Fintech, with support from the HKU Faculty of Law.
*** For a broader introduction about the topics discussed, check out the recently published book by Ross P. Buckley, Douglas W. Arner and Dirk A. Zetzsche: FinTech: Finance, Technology and Regulation. The contents of this book were also discussed in our podcast with Dirk A. Zetzsche - tackling the need for alignment between financial innovation and regulatory policies to navigate the complex issues facing the industry today: RR Episode 31 - Dirk Zetzsche.