Page 86 - ITU-T Focus Group Digital Financial Services – Interoperability

ITU-T Focus Group Digital Financial Services
Interoperability

Executive Summary

Non-banks are having an increasing role in payments, including the provision of payments services directly
to end-users. Despite this increasing role, many of them are still not accepted as direct participants of key
payment infrastructures, which often leads to limited or null interoperability in the services/products they offer.
Moreover, being able to use key payment infrastructures at a reasonable cost and with appropriate service
levels is an important element underlying a competitive payments market.
The operators of these payment infrastructures should adhere to international standards and best practice
and establish risk-based and objective access criteria, and ensure that any PSP that wishes to gain direct access
and meets such criteria is able to join as a direct participant.
Still, for many non-bank PSPs gaining direct access may not be feasible due to the investments they would need
to make in order to fulfill the infrastructure’s access criteria. In such cases indirect access mechanisms may
be capable of providing these PSPs with suitable payment services. However, in certain cases indirect access
may not be as effective, for example if charges applied by the principal (an entity that is a direct participant in
the infrastructure) are excessive relative to the costs it itself incurs for using the system, or if the criteria set
by the principal for opening accounts and providing payment services to customer PSPs are disproportionate.

Payment system regulators, in particular the central bank as the payment system overseer, should ensure that
all PSPs are able to gain fair access to payment services, including those for which direct access is not financially
feasible and need to access the services through a principal.

Effective access to payment infrastructures may also be hampered if there are barriers to accessing the
telecommunications networks serving those infrastructures. Telecomm regulators may also have a role to
play in markets where it has been observed that MNOs that are involved in the payments business restrict in
some form the access to other PSPs to the mobile telecommunications network that these MNOs operate.
Introduction and Background

Until relatively recently, non-cash payment services were essentially – and in some countries, exclusively –
provided by commercial banks. The role of banks as retail payment service providers was historically linked to
another of their key functions, which is deposit-taking. This is: banks provide their depositors a gateway for
making payments to other depositors in the same bank or in another bank. For this purpose, banks (including
the central bank) developed payment systems, and traditionally were the sole direct participants in most of
these.

However, the payments landscape has changed significantly in line with evolving payment needs, product,
process and technical innovations, as well as other structural developments. In many countries, financial
inclusion has been a major driver of change in the retail payments arena.

Development of digital financial services (and in general the shift from cash and paper-based instruments to
electronic) and the expansion of the networks of service delivery/customer service points to bring financial
services closer to where people live and transact are regarded as critical tools for achieving financial inclusion
objectives, as well as overall payments efficiency objectives. Interoperability of the various payment services
offered is another key tool to enhance the proximity of financial services and to increase overall convenience
to end-users.
In this context, non-banks are having an increasing role in payments in general, and in retail payments in
particular, including for the continued development of digital financial services.

Despite this increasing role, many non-banks that provide payment services are still not accepted as direct
participants in many payment infrastructures, either of a retail nature or a large-value nature. This often
1

1 "Direct participation" and other relevant terms in the context of access to payment infrastructures are described in detail in
section III of this document.

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