Page 62 - ITU-T Focus Group Digital Financial Services – Interoperability

ITU-T Focus Group Digital Financial Services
Interoperability

Technical modalities of international PSI interlinking

8. Cross-border transactions can be made possible by establishing bilateral links between national PSIs .
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Perhaps the simplest form of PSI interlinking is achieved when two central banks agree on a scheme to
support or facilitate cross-border transactions. This likely requires linking the large-value transfer systems of
the countries involved by developing technical interfaces between them. Some other solutions are possible
which link national payment systems through central bank bilateral accounts, whereby participating central
banks hold settlement accounts either with one another or with a common commercial bank.

Figure 1 – Decentralized payments system

9. More advanced solutions for PSI interlinking are characterized by the adoption of a unified scheme and a
common technical-operational facility to process the transactions defined under the scheme. The common
(regional or global) technical-operational facility follows one of two basic architectures: the decentralized
model, or the single or fully centralized model. Arrangements adopting a decentralized model for regional,
cross-regional and/or global payments link existing national settlement systems (Figure 1). These normally
feature different degrees of sophistication and complexity. Most decentralized regional payment systems are
designed in a "hub-spoke" structure, in which there is a central administrative and technical-operational facility
referred to as the "hub entity", which links the participating systems . The interlinking mechanism is usually
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a standardized messaging and connectivity technology, which links account management and the various

8 A link is a set of contractual and operational arrangements between two or more payment system infrastructures, which
connects them directly or through an intermediary. While technical interfaces generally are developed to allow some degree of
automation to support certain information and data exchanges, links generally also require some degree of harmonization of
operating rules and other scheme features as a pre- requisite. More elaborate and sophisticated links allow for partial or even full
interoperability and straight-through-processing at a transactional level of the underlying technical operating platforms. On links,
see also Box 3.
9 The operator or "hub entity" can be one of the participating payment system infrastructures, an entity that is independent of the
infrastructures linked through, or an operating unit of a participating infrastructure.

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