Page 94 - ITU-T Focus Group Digital Financial Services – Interoperability

ITU-T Focus Group Digital Financial Services
Interoperability

• Increased interoperability of and access to infrastructures supporting the switching, processing, clearing
and settlement of payment instruments of the same kind are promoted, where this could lead to material
reductions in cost and to broader availability consistent with the local regulatory regime, in order to
leverage the positive network externalities of transaction accounts.

C. Ownership and governance of payments infrastructures

As mentioned in section III, RTGS systems are owned by central banks which are very often bounded by their
respective organic laws on the types of entities that can become direct participants of this and other payment
systems they operate. Many central banks in their role as monetary and financial stability authorities also limit
participation on the basis of concerns of potential negative implications of NBFIs and other entities becoming
direct participants in the RTGS system .
17
Hence, direct participation in RTGS systems is often restricted to commercial banks and to some operators of
other payment and settlement systems (e.g., retail payment systems, securities settlement systems, central
counterparties, etc.). In some cases, other non-bank financial institutions that have been licensed and are
supervised can also become direct participants.

ACHs can be owned by the central bank, by the private sector or have mixed ownership. For central bank-owned
ACHs, it is common for direct participation to be restricted in the same way as for the RTGS system, often
because in both cases participation is largely dependent on being able to have an account at the central bank.

For privately operated ACHs two common scenarios are: 1) the ACH is owned by a consortium of banks and is
operated as a cost center rather than with a profit-maximizing objective; and, 2) the ACH is privately owned,
with ownership being partly or largely independent from participation, and is a profit-maximizing venture. In
the first scenario, direct participation tends to be limited to the banks that are also shareholders, or in some
cases also to other banks as this allows the ACH to reach the whole banking sector. In the second case, direct
participation tends to be open also to at least some types of non-bank PSPs as the ACH owner(s) will have
an incentive to process the largest possible volume of transactions in order to help it maximize total revenue
and profits.

Similar considerations apply to payment card switches, which only rarely are owned by central banks. In these
infrastructures, however, participation for the sole purpose of transaction routing/switching (see section III.b)
is likely to be more open to non-banks PSPs that operate payment cards or other payment instruments that
can be processed through the same switch.

The governance structure of a payments infrastructure also has a significant influence on its access policies.
Infrastructures owned by bank consortia and whose governance structures are based solely or essentially on
ownership (e.g., based on the percentage of company shares owned) will tend to preserve the status quo,
i.e. limiting participation to owners and possibly a few other entities. Or, even if other non-bank PSPs may
access the infrastructure directly, the underlying terms and conditions might be disadvantageous relative to
those that are applied to traditional participants in aspects like the initial subscription fee, monthly fee, per
transaction fees, etc.
In some cases the central bank participates in the governance structure of these infrastructures, or is able
to influence it through regulation and/or moral suasion so that all existing or potential participants are given
fair access conditions.

17 For example, there may be concerns that such other entities, once they join the system, may be seen as being under the general
regulatory purview of the central bank and being covered by "safety net" mechanisms.

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