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Federal Reserve Governor Michelle Bowman addressed the complexities surrounding cross-border payments during her speech at the BCBS-FSI High-Level Meeting for Africa in Cape Town, South Africa.

Bowman acknowledged the presence of both necessary and unnecessary frictions in cross-border payments. She emphasized the importance of evaluating these frictions in light of public policy tradeoffs and operational realities. While some frictions are essential, stemming from policy choices and safeguards, others may not be necessary.

One example Bowman highlighted is compliance requirements. Despite adding complexity, especially in cross-border transactions, these rules are essential for applying various compliance frameworks across different jurisdictions.

To address these challenges, Bowman proposed encouraging more consistent implementation of rigorous international standards and supporting the development of new technologies to automate processes, reduce costs, and promote effective safeguards globally.

Her remarks come amidst a surge in cross-border payment volumes, driven by increased global trade. As more companies engage in international transactions, the importance of streamlining cross-border payments becomes paramount.

In addition to discussing cross-border payment frictions, Bowman’s speech also touched upon the Fed’s efforts to promote financial inclusion through responsible innovation. She cited guidance issued by the central bank supporting banks in offering small-dollar lending and using alternative data in credit underwriting.

Overall, Bowman emphasized the Fed’s commitment to fostering responsible innovation while ensuring that financial institutions meet their customers’ needs effectively and responsibly.