Page 205 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

D ACCESS TO PAYMENT INFRASTRUCTURE & SERVICES

9 Payment infrastructure & services

9.1 Overview

Transfer of funds between stores of value such as DFS accounts and bank accounts, as well as integration into
retail payment systems is key to building a DFS ecosystem and requires interoperability between systems.
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This can be achieved by providers participating in a scheme, through a variety of bilateral or multilateral
arrangements, or integration into automated clearinghouses (ACH), payment card processing platforms
(payment switches), and national payment system (NPS) infrastructures such as Real Time Gross Settlement
(RTGS).
Access to RTGS is usually controlled by the central bank. For example, SPEI is a RTGS system developed and
operated by Banco de México in which banks and non-banks can participate. In general, technical, risk and
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business rule issues need to be resolved for interoperability to work. 169

9.2 Competition aspects

Access to existing payments infrastructure for non-bank payment service providers at FRAND is necessary to
ensure a level playing field in the provision of DFS and efficiency and interoperability of DFS.

Even though interoperability in the DFS ecosystem is still evolving, there already appears to be examples where
there is asymmetric access to existing infrastructures in a number of markets, primarily where the payment
infrastructure is controlled by a payments association, bank, or consortium of banks. The Interoperability
Working Group (IWG) of the ITU DFS FG identified access to payment infrastructures by non-bank PSPs as
potential block to competition in DFS. Specifically, the IWG pointed out that access to payment infrastructures
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such as RTGS, NPSs, ACHs and payment switches is generally the domain of Tier 1 or 2 banks and bank-
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dominated payment companies. Similarly, a key payment switch could be controlled by one private entity
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or one where there is private-public ownership. 173
To date, at a global level, bank-based models of DFS have faced most favorable conditions in integrating with
payments infrastructure. Given the incumbent position of banks in the provision of DFS and their ownership
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and control of much of the existing payments infrastructure, there is potential for their dominant position
in the provision of payments infrastructure to result in blocking competition in the downstream market for
payments services. Pricing models and asymmetric contract power in interchange and switch fees negotiations
may prompt competition concerns. Similarly, a monopoly over access to a key national payments interface has
competition and systemic implications. 175

167 Note that while the ITU DFS FG WG on Interoperability has produced comprehensive overviews of issues, some of this work is
summarized below to give this study completeness.
168 See Banco de Mexico (2017) Interbanking Electronic Payment System, available at https:// goo. gl/ l8cD4o
169 ITU DFS Focus Group (2016) Glossary, available at https:// goo. gl/ yrl1bk
170 ITU DFS FG (2016c) Interoperability, available at https:// goo. gl/ oVmDhe
171 The Tiers relate to the size and capital reserves of banks. Tier 1 banks generally are at the core of an NPS.
172 See CGAP (2014) ibid See CGAP (2014) ibid
173 See India and Nigeria below.
174 For example SPEI in Mexico and 1Link in Pakistan
175 See in particular below, the case in India with NPCI.

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