Concluding Remarks at the IMF-Swiss National Bank High-Level Conference, Zurich
Good afternoon. I would like to thank Governor Jordan and the Swiss National Bank for co-hosting our High-Level Conference here in Zurich.
Our discussions today—at the 10th edition of this conference—have rightly focused on a key question: how to secure a stable, efficient, and inclusive international monetary system that is fit for the digital age.
This system of rules, mechanisms, and institutions that govern monetary arrangements and capital flows between countries has developed over decades. And to continue promoting financial stability and economic development everywhere, it must continue to evolve and adapt in a rapidly changing world.
Just look at the impressive network of Swiss roads and railways, with bridges and tunnels, engineered to cope with the diverse, and often challenging terrain. So, too, must we ensure that the international monetary system is engineered to cope with the changing global economic landscape.
As we look to a digital future, the system also needs to withstand the growing forces of fragmentation.
These forces have become stronger as a consequence of Russia’s invasion of Ukraine. It has caused not only tremendous human suffering, but also a global economic shock and a sharp increase in the risk of a ‘new Cold War.’ A world that could fragment into ‘economic blocs’, creating obstacles to the cross-border flow of capital, goods, services, ideas, and technologies.
These are the very drivers of integration that have boosted productivity and living standards, tripling the world economy and lifting 1.3 billion people out of extreme poverty over the past three decades. So, the cost of disintegration would be enormous—and the most vulnerable people and countries would be most affected.
Faced with these risks, we can either surrender to trends that will make the world poorer and less stable. Or we can work even harder to seek pathways to prevent the fragmentation of the international monetary system—just as we must work together to confront global threats such as climate change.
We must design and build the infrastructure that facilitates further integration. That includes stepping up our work on cross-border payments.
Specifically, today I would like to focus on developing a new public infrastructure to connect and regulate various payment systems, to counter fragmentation of the international monetary system.
It would be a new way of connecting people, markets, and economies in the digital world.
2. The International Payment System
What do I mean by that?
We must look underneath the international monetary system—to its foundations—what I would call the international payment system. These are the financial ‘roads, railways, bridges, and tunnels’ that allow currencies to be exchanged and capital to flow between countries.
That system includes links between correspondent banks; messaging systems such as Swift; money transfer businesses and credit card networks; as well as foreign exchange markets, and arrangements between central banks.
Clearly, this international payment system is not perfect.
Cross-border payments are expensive, slow, opaque, and not available to many of those who need them most. Why? Because many of the ‘roads’ lead to nowhere, the ‘railways’ work on different gauges, and the ‘tunnels’ are not well lit. Where these networks are not interoperable, intermediaries will build connections and take their cut.
A good example is remittances. The average cost of a transfer is 6.3 percent. Which means that some $45 billion per year are diverted into the hands of intermediaries and away from ultimate beneficiaries—including millions of lower-income households.[i]
But there is an even greater challenge: the international payment system also faces the growing risk of fragmentation that I mentioned earlier.
Some are structural risks: private digital money providers are promising cheap cross-border payments, but often within their closed network of users. And there are geopolitical risks: some countries may consider developing parallel, disjointed payment systems to mitigate the risk of potential economic sanctions.
These ‘payment blocs’ would only worsen the impact of broader ‘economic blocs’—creating new inefficiencies and imposing new costs. This would harm productivity and living standards in all countries.
We can do better. We must do better—and fast.
So, my main message today is this: countries need to work together to build new ‘roads, railways, bridges, and tunnels’—using public digital platforms to connect payment systems.
This would make international payments more efficient, safer, and more inclusive. Crucially, it would reduce the risk of fragmentation.
That is a tall order, but not an insurmountable one. Scaling this mountain is well worth it. And for that, our Swiss friends again can be our guides—with their history of cooperation and, quite literally, their mountaineering expertise.
Indeed, we must think like a mountaineer in three ways: use state-of-the-art equipment, adapt to the existing terrain, and rely on our team.
3. Modernizing the International Payment System
(a) Use State-of-the-art Equipment
First, we must use state-of-the-art equipment, especially new technologies. In our discussions today, we heard that sending money across borders can be nearly instantaneous and costless. That’s a key takeaway from several pilots run by the BIS Innovation Hubin partnership with many central banks represented here today, including the Swiss National Bank.
A central component of the pilots is public infrastructure. This involves digital platforms that facilitate communication, regulatory compliance, competition among payment providers, and—eventually—settlement of transactions across borders.
Let me give you an example: my bank in Washington might exchange my ten dollars for a digital token—which is then transferred via a platform to a Swiss payment provider who credits the wallet of my friend in Zurich. This is the equivalent of sending a ten-dollar bill via mail—but at maximum speed and safety, and minimal cost.
Clearly these new public platforms will continue to evolve.
We’ve heard from emerging and developing countries that there is a keen interest in extending services beyond just payments. Could the exchange of one currency into another be available on the platform? Could less liquid currency pairs find more willing counterparts?
In short, payment platforms could become much more useful to a wider range of users.
This potential evolution will be driven by the ability to program the platform. For instance, a small business might hedge foreign exchange risk related to a future payment. Or a financial firm might automate its bids in a foreign exchange auction run on the platform. This opens the door to private-sector innovation, competition, and enhanced functionality on the platform.
And it extends the notion of the public good: from ensuring settlement finality, to offering a standard programming interface—a shared language to access and automate services on the platform.
That mountaintop may be distant, but it’s worth exploring.
So, too, is the idea of a platform that connects various forms of money countries will use and legally support. That includes commercial bank deposits, but potentially also central bank digital currencies, and even some stablecoin arrangements—if they are well-designed and regulated.
Such a platform is especially important for economies with less advanced payment systems. By embracing diverse forms of money, we can make payments work for all people, in all countries.
But we need more than just great equipment.
(b) Adapt to the Terrain
Which brings me to my second point: just like good mountaineers, we must adapt to the terrain. This means building platforms that allow countries to continue pursuing their policy objectives—especially when it comes to capital flows.
As I said at the beginning, the international payment system has a direct bearing on the international monetary system. So, as payments become more efficient, capital flows will also continue to evolve.
We may see an overall increase in flows. This could boost productive investment and integrate markets—and we may see more flows to low-income countries, or sectors that have benefited less in the past.
At the same time, greater efficiency could bring risks: from higher financial market contagion and valuation effects, to sudden capital flow reversals. These are especially harmful for developing countries with high external financing needs.
To mitigate these vulnerabilities, countries are striving to take the right fiscal, monetary, structural, and legal measures. And in some cases, they use capital flow management measures to slow down capital flows. Helping countries respond with agility is a key reason why we recently updated the IMF’s institutional view on this topic.
Currency substitution is another risk—that’s in countries where households and firms prefer to use a foreign currency for transactions and savings. When the desired currency becomes digital—and therefore easier to store on a phone than under a mattress—the risk of currency substitution jumps.
So, as payments become more efficient, some countries may have to throw sand in the gears—in the form of capital flow management measures—to protect themselves against currency substitution and to create breathing space to strengthen their monetary frameworks and other policies.
Here, too, there is a risk: think of how crypto assets might be used to circumvent capital flow management measures, undermining the stability of domestic economies and the global system.
New IMF research—published today—clearly shows that risk. And that is why we are calling for comprehensive and coordinated global regulation in this area. We also need better data and technologies—such as ‘regtech’ and ‘suptech’—to automatically detect risks and irregularities in capital flows.
I believe that a new public infrastructure of digital payment platforms could enable countries to implement these and other measures more efficiently. From the outset, these platforms can be calibrated to country-specific needs and policy objectives—and they must include appropriate risk mitigation measures.
This is how we can navigate the evolving policy terrain in new and better ways.
(c) Rely on Your Team
My third point is that mountaineers never climb alone. They rely on their teams and the well-rehearsed reactions and signals to deal with unforeseen situations. This approach is essential to modernize the international payment system and mitigate fragmentation. It means, above all, getting governance right.
Who will be able to access these cross-border payment platforms? Under what conditions? Who will run, manage, and oversee these platforms? What is the role of the private sector? We will need to tackle these questions and agree on a set of clear rules for the future.
One thing is clear: predictability will facilitate integration, whereas excessive discretion will likely increase the risk of fragmentation.
This may well be the steepest part of our climb.
When it comes to governance, countries will ultimately decide. However, international organizations—such as the IMF, the Bank of International Settlements, and the Financial Stability Board—can play an important role. We can suggest concrete solutions, foster consensus, and bring together not just policymakers but also the voices of private firms and civil society.
In closing, I want to draw one final piece of inspiration from our Swiss friends.
Legend has it that, in 1291, three prominent mountaineers climbed a mountain close to where we are today. One from the Swiss canton of Uri, another from the canton of Schwyz, and a third from the canton of Unterwalden.
At the top, they pledged allegiance to each other, to common rules, and to cooperating in the face of external threats.
Their agreement is celebrated as the founding of the Swiss Confederation more than 700 years ago.
Just like these mountaineers, we must work as a team. Together, we can put the international payment system on a sounder footing—to support the digital world of tomorrow, to foster an international monetary system that can bring greater stability and prosperity for all.
[i] Source (average cost of 6.3%): World Bank: “Remittance Prices Worldwide Quarterly”, Issue 40, December 2021;” IMF calculations ($45bn, given the total volume of more than $700bn per year).