Page 41 - ITU-T Focus Group Digital Financial Services – Interoperability

ITU-T Focus Group Digital Financial Services
Interoperability

Box 3. Safety and efficiency in payment systems
The concept of efficiency generally refers to the resources required by a system to perform its
functions. Applied to payment systems, efficiency entails several aspects. One is the overall effect
of the payment system on the cost of exchanging goods, services, and assets (including money) in
the economy: a more efficient payment system reduces that cost. Relatedly, an efficient payment
system provides its users with speedy, affordable, and easy to access use of services. Another aspect
of efficiency relates to the resources necessary to operate a system: by introducing specific efficiency
solutions, some systems may economize on the use of (costly) liquidity to settle payments, for any
given level of settlement risk. Further aspects of payment system efficiency refer to the volume
of transactions the system makes possible for any given quantity of money or to the speed of the
transmission across the economy of monetary policy impulses.

On the other hand, safety is about protecting systems and stakeholders from hazards. Especially as
it refers to large value transfer systems, safety means containment of the financial and non-financial
risks which typically arise within these systems, or are transmitted by them, and which threaten not
only to impair the functioning of the systems, but to jeopardize the financial stability of the overall
economy. Safety requires that systems are secure, reliable, and operate without service interruption
or recover operation promptly in the event of interruption. As the scope of central bank oversight
extends to retail payment systems and instruments, the concept of safety necessarily broadens and
involves other aspects, as users’ expectations of payment service quality. Here safety, therefore, refers
to the protection of user rights, in particular, those concerning safeguards of user own funds, data
integrity and privacy, prevention of fraud and cyber-crime, information disclosure and transparency,
and claim redress and dispute resolution.

16. Central banks in many jurisdictions have expanded their payment system strategic vision and, with
it, the objectives and responsibilities of their oversight function. In particular, as oversight extends to
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retail payment systems and instruments, efficiency and safety necessarily involve other aspects, since the
expectations of payment service users take center stage in the definition of the criteria to assess how well the
systems and instruments perform (see Box 3).

17. A number of other objectives and responsibilities have become integral to the oversight policy
framework of central banks. They include:
Inclusiveness

18. Providing easily accessible and affordable payment services to the largest possible number of citizens,
especially if unbanked, has become an important goal for many central banks. Since markets alone do not
find it commercially convenient to provide payment services to poor communities, especially if located in
remote, isolated, or sparsely populated geographical areas, central banks (as well as other financial regulatory
agencies) are called upon to create the conditions to extend the availability of at least basic payment and
financial services to underserved segments of the population, and to facilitate their progressive inclusion
within the financial system.

9 The case of India is illustrative, and it is interesting to examine how the payment system vision of the Reserve Bank of India (RBI)
has progressed over the last decade. In its 2005-08 vision document, the RBI objective was “the establishment of safe, secure,
sound and efficient payment and settlement systems for the country.” In the subsequent vision document (2009-12), the RBI
– much more assertively – indicated that it wanted “to ensure that all the payment and settlement systems operating in the
country are safe, secure, sound, efficient, accessible and authorized.” Finally, in its latest vision document (2012-2015), the goal
has been broadened further “to proactively encourage electronic payment systems for ushering in a less-cash society in India and
to ensure payment and settlement systems in the country are safe, efficient, interoperable, authorised, accessible, inclusive and
compliant with international standards”.

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