The Missing Link: Legal and Regulatory Challenges in Interlinking Fast Payment Systems

Fast payment systems are digital payment infrastructures that connect banks and non-bank payment service providers, enabling them to exchange payment instructions and settle payment transactions in real time. This allows retail consumers to make payments at any time, 24 hours a day, 7 days a week, year-round (24/7/365). A defining feature of fast payment systems (FPS) is the final crediting of funds to the payee in or near real time. ‘Final crediting’ means the recipient has unconditional and irrevocable access to the funds, even if settlement between payment service providers occurs later.

FPS are designed primarily for low-value, retail transactions between end users. This distinguishes them from Real-Time Gross Settlement (RTGS) systems, which process high-value, wholesale payments between financial institutions. As of June 2025, 117 countries have implemented a domestic FPS. Nearly 30% of these systems have established at least one cross-border linkage, most commonly within regional clusters such as Asia-Pacific and Europe.

Despite this domestic progress, cross-border retail payments (commonly known as ‘remittances’) remain inefficient. Although global remittances exceeded $800 billion in 2023, traditional correspondent banking channels continue to impose high costs, delays, and limited transparency. Cross-border transfers often take several days to settle, as they pass through chains of intermediary banks across multiple jurisdictions. Each intermediary adds fees, foreign exchange spreads, and additional compliance checks. In response, the G20 has set a target of reducing the global average cost of remittances to below three per cent by 2027. This target is unlikely to be met. 

Our paper argues that the fastest and most practical pathway to achieving this important objective is to interlink existing domestic FPS infrastructures. While various novel financial technologies have been proposed, including stablecoins, wholesale central bank digital currencies (wCBDCs), and fintech solutions like Wise, each has their own limitations. Stablecoins face regulatory and monetary sovereignty concerns; fintech solutions can take days to complete transfers in less-developed corridors; and wCBDCs remain untested with unknown systemic risks. In contrast, interlinking domestic FPS allows payment messages and settlement instructions to move directly between systems that already exist, enabling near-instant cross-border transfers without entirely new infrastructure.

As our paper explains, FPS maintain prefunded settlement accounts held either at a central bank or within FPS infrastructure and are replenished during central bank hours from reserve balances. Participation is generally limited to authorised financial institutions, subject to eligibility criteria and a set of operating rules and procedures, typically contained in a ‘Rulebook’, which functions as a contractual agreement between participants and the platform. 

Although the payee’s account is credited almost immediately, interbank settlement may not occur at the same moment. FPSs can settle transactions individually in real time or via deferred net settlement, where obligations are calculated and settled in batches. This makes it essential to differentiate between operational finality and legal/settlement finality. Operational finality occurs when the payee’s account is credited and funds become available for use. Settlement finality refers to the point at which the transfer becomes legally binding and cannot be reversed, including in insolvency.

This distinction becomes critical in cross-border contexts. If a paying bank becomes insolvent after the payee’s account has been credited but before interbank settlement is complete, the receiving bank may seek to reverse the transaction if it has not received corresponding funds. In jurisdictions without strong protections, insolvency doctrines such as the ‘zero-hour’ rule may retrospectively unwind payments made earlier that day. Differences in national approaches to finality, netting, insolvency, anti-money laundering and counter-terrorism financing (AML/CTF) obligations, and data protection can magnify these risks. As such, we propose the development of a coherent and enforceable cross-border framework supported by a ‘Single Rulebook’ that clearly defines settlement finality, allocates liability, harmonises compliance standards, and establishes dispute resolution mechanisms. 

Cross-border interlinking also introduces interconnected credit, liquidity, settlement, and systemic risks. We propose a layered mitigation structure combining prefunded balances in central bank money, enforceable netting arrangements with ‘super-priority’ insolvency protections, and (where feasible) mutual default funds or a central counterparty (CCP) model to absorb losses. Cross-currency foreign exchange settlement risk should be addressed through mechanisms approximating payment-versus-payment (PvP) protection. Where real-time PvP is impractical, the combination of prefunding, multilateral netting, and statutory finality can function as a form of ‘synthetic PvP’ that materially reduces principal risk.

Similarly, divergent sanctions regimes, data localisation rules, and screening standards can complicate straight-through processing and amplify AML/CFT and data governance. By embedding harmonised compliance standards directly into the Single Rulebook, with clear liability allocation and the exclusion or suspension of jurisdictions that fail to meet FATF benchmarks, compliance can become an architectural feature of the interlinking system rather than an afterthought.

While recent initiatives have focused largely on technical pilots, we emphasise that legal foundations are equally essential to building trust and minimising risk. We present the first comprehensive legal and policy framework for the safe and effective interlinking of FPSs across borders. Success will require international cooperation, led by central banks and supported by global institutions developing common standards and ensuring policy alignment. 

We anticipate regional hubs will likely emerge first and serve as testbeds for harmonisation before scaling into a global network and expect political coordination to be the greatest challenge. Although challenging, the rewards will be faster, safer, and more accessible cross-border payments for billions of retail consumers worldwide.

The authors’ full paper can be accessed here.

Ross P Buckley is a Professor of Law and Justice at UNSW. 

Christian Chamorro-Courtland is a Senior Lecturer at Western Sydney University School of Law.