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Oversight on Retail Payments

De Nederlandsche Bank. Oversight on Retail Payments Paul Osse Conference Financial Sector of Macedonia on Payments and Securities Settlement Systems Ohrid 25 June 2008. Content. Objective presentation Objects Influence of developments Non banks

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Oversight on Retail Payments

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  1. De Nederlandsche Bank Oversight on Retail Payments Paul OsseConference Financial Sector of Macedonia on Payments and Securities Settlement Systems Ohrid 25 June 2008

  2. Content • Objective presentation • Objects • Influence of developments • Non banks • Oversight on retail payments;the role model

  3. Objective presentation • Notto detail how oversight is performed BUT • To high light organisational structure for inter-institution payments • To discuss the impact of changes on this organisational structure • To high light effect on oversight

  4. Objects of oversightSystem of retail payments in NL *OwnerInterbankPaymentProducts Legend:. payment order. order flow info. owner relation. payment products. goods/services. owner payment * product relation National Central Bank *Debtor’sCommercial Bank *CreditorsCommercial Bank * AutomaticClearing Houses Electronic MoneyInstitutions Payer Payee

  5. Oversight on the paymentsystem: the role model Object of oversight:The whole payment chain Paymentinstrument Channel/medium Transaction Processing Clearing Settlement

  6. Objects (general) • Retail Payment Systems • Payment Instruments

  7. Objects (2) The objects are systems and instruments, but it is inevitable to look at the actors/roles involved: • system/instrument owner • operator/processor • issuer/acquirer • etc.

  8. Objects (3) • More and more non-banks involved in the payment system. • Not (yet) regulated by banking supervision acts (in NL). • Payment Services Directive.

  9. Objects (4) Starting point and so far mainly inter bank systems and instruments, however: • correspondent banking • systems of large banks/consortia • instruments of one bank (or payment service provider)

  10. New technologies and retail payments

  11. Influence of developments (1) Trends retail payments: • European Consolidation • TARGET • SEPA • Specialisation/Unbundling • Multiple operators/owners: card schemes, transaction networks, etc

  12. Influence of developments (2) • Market developments • New technologies • contactless, mobile payments • internet • biometrics • New providers of payment services • telecom providers • public transfer • etc etc

  13. Non banks in the payment system • Outcome recent survey: >125 non banks • Non banks are active in the whole payment chain

  14. Oversight on the paymentsystem: the role model General approach oversight: • Licensing or moral suasion • Assessments of systems and products against standards • Regular oversight

  15. Oversight on the paymentsystem: the role model Oversight based on standards like: • Wholesale systems (e.g. Core principles for systemically important payments systems, SIPS) • Retail systems (e.g. Oversight standards for Euro retail payment systems and (Subset of) Core Principles • Payment products (e.g. Recommendations for payment products) • Securities settlement systems (CPSS/IOSCO Recommendations) • Technical standards (ISO, ECBS, NVB,...)

  16. Oversight on the paymentsystem: the role model Disadvantage of current basis: • No legal instruments • Standards pay to less attention to: • the control of the system operator/product owner • other participants in the chain In addition: • Supervision/oversight is split up over several authorities

  17. AFM DNB Prudential Supervision DNB Oversight Overview supervision on the non cash payments *OwnerInterbankPaymentProducts Legend:. payment order. order flow info. owner relation. payment products. goods/services. owner payment * product relation National Central Bank *CreditorsCommercial Bank *Debtor’sCommercial Bank *Electronic Money Institutions AutomaticClearing Houses Payer Payee

  18. Oversight on the payment system Consequences. The risk exists: • Gaps in control aren’t detected • Risks introduced by current other players aren’t (timely) detected • Risks introduced by new players aren’t (timely) detected

  19. Oversight on the paymentsystem: the role model To solve these problems our oversight approach is changed to: A role based approach

  20. Legal Owner Acquirer Issuer Clearing Institution Acceptant Payment Service Provider Consumer Merchant/acceptant Issuing Clearing Acquiringprocessor processor processor Settlement Networkprocessor processor Settlement Institution Scheme oriented organisation retail payments Acquirer Service Providor Retailer

  21. Scheme owner Issuer Issuing processor Acquirer Acquiring processor Network processor Clearing institution Clearing processor Settlement institution Settlement processor Consumer Merchant Card manufacturer Card personalisation Card destroyer SAM manufacturer SAM personalisation SAM destroyer POS manufacturer Acceptant Payment Service Provider Oversight on the paymentsystem: the role model Possible roles in the payment scheme

  22. Oversight on the paymentsystem: the role model Advantages role based approach: • Alignment with the scheme oriented organisation of the retail payments • More efficient approach • Improvement in the process of defining standards • Tie-up to new developments will be more easy

  23. QUESTIONS?

  24. Time’s up……… Thank you for your attention P.W. Osse RE RA CISA De Nederlandsche Bank N.V. +31 20 - 524 3292 p.w.osse@dnb.nl

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