lessons learned from payments system interoperability carol coye benson managing partner glenbrook...
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Lessons Learned from Payments System Interoperability
Carol Coye BensonManaging Partner
Glenbrook [email protected]
ITU Workshop on “Digital Financial Services and Financial Inclusion”
(Geneva, Switzerland, 4 December 2014)
Payments Systems
Payments systems around the world are “bank transfer systems” – consumers and businesses use them through relationships with banks
Check, ACH, and “open loop” card systems all work this way
End UserEnd User
End UserEnd UserBankBankBankBank
BankTransf
er Syste
m
BankTransf
er Syste
m
Payments Systems
Bank transfer systems have “built-in” interoperability, and can reach all banked customers in the countryThe “hub” is often an industry-owned consortium, with a cost-recovery business model for participating banksIn some countries, regulators are expanding direct participation in these systems to non-bank payments institutions
Payments Systems Functions
RULESLaw and Operating Rules
BRANDCommon terms for payer and
payee
PROCESSINGSwitching and
settlement
• Transaction management
• Liability• Interchange• etc.
Payments Systems
Closed-loop systems exist, but are much less common, and struggle to reach ubiquity
The “Payments Services Provider” is often (but not always) a non-bankMany mobile wallet products work this way
End UserEnd User
End UserEnd User
Payments
System
Provider
Payments
System
Provider
Possible, but challenging
Network Interoperability
End UserEnd User
End UserEnd User
Payments
System
Provider
Payments
System
Provider
End UserEnd User
End UserEnd UserBankBankBankBank
BankTransf
er Syste
m
BankTransf
er Syste
m
Not a technical problem….
Which network rules apply?Are the networks competitive?
Are end-parties confused?
Interoperability and Financial Inclusion
The unbanked use cash, which is interoperable: “accepted everywhere”To move away from cash in a manner useful to the unbanked, we need to at least meet the “cash threshold”:
UbiquitySimplicityLow cost
Conclusions and Recommendations
There are effective models for interoperability among banks that can apply to mobile money systems
Cash is the standard against which the unbanked will measure the usefulness of mobile money