Page 65 - ITU-T Focus Group Digital Financial Services – Interoperability

ITU-T Focus Group Digital Financial Services
Interoperability

schemes’ cardholders to the cross-border debit and ATM networks. Global card payment schemes such as VISA
and MasterCard provide cross-border interoperability in transaction systems for credit and debit payments and
ATM cash withdrawals for cardholders and (vertical) integration of these systems with proprietary clearing and
settlement systems. As global card payment schemes, they deal with domestic, regional, and cross-regional
payments .
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16. Regional and cross-regional interlinking of national and funds transfer systems in general is a fairly recent
development. Some, such as EBA Clearings’ STEP2 in Europe and SICA-UMEOA in the West African Monetary
and Economic Union, are single regional schemes and systems for both domestic and cross-border payments
among member countries using the euro and the CFA franc, respectively. Others are generally constructed
through (horizontal) bilateral linkages between national ACHs. These linkages allow the ACH members in one
country to transmit customer payments, typically via credit transfers, to end-receivers holding accounts with
ACH members in other countries. The network architecture for regionally or cross-regionally linked payment
clearing infrastructure and for single regional ACHs can be either a hub-spoke arrangement with a central hub
connection, a centralized network structure, or a distributed bilateral network structure, which contemplates
the operation of large providers of payment clearing and processing services (Box 1). Another example, in
Europe, is the Single Euro Payments Area (SEPA) scheme compliant clearing and settlement mechanisms
(CSMs). Services offered by competing CSMs, based on the SEPA payment schemes, are governed by market
forces and are outside the remit of the European Payments Council (EPC). The EU regulation provides that,
within the EU, a PSP reachable for a national euro credit transfer or direct debit shall be reachable for euro
credit transfers or direct debits initiated through a PSP located in any member state. Any PSP participating in
any of the EPC SEPA Schemes (SEPA Credit Transfer, SEPA Direct Debit), under the relevant scheme adherence
agreement with the EPC and the relevant EPC SEPA Scheme Rulebook, is permanently obligated to comply
with reachability from its readiness date. Each PSP needs to determine how to achieve full reachability for
the EPC SEPA Scheme(s) it has adhered to. There are several ways for PSPs to send and receive euro payment
transactions to and from other PSPs across SEPA. PSPs can choose and use any solution or combination
of solutions, directly or indirectly, as long as reachability and compliance with the EPC SEPA Schemes are
effectively

17 Notable features among these global schemes are: the interoperability between schemes at point-of-sale devices, at least in
some countries and regions; the integration between transaction systems; and globally centralized clearing and settlement
systems for each of the card schemes. They involve proprietary messaging and processing systems for inter-member-bank clear-
ing and settlement with decentralized authorization and processing at the member-bank level for cardholders and merchants.
However, the actual cross-border funds transfer involves central counterparty/correspondent banking linkages to the national
large-value payment systems of the countries in which they participate. Cross-border/cross-currency payments involve banking
relations between member-banks in one country and a correspondent bank in the other country. Thus, even some highly
integrated schemes and systems, such as those for global card payments, must link through local banks to national and regional
inter-bank payment settlement infrastructures in order to settle cross-border/cross-currency inter-member payments.

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