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Interoperability in Electronic Payments: Lessons and Opportunities

A robust environment of interoperability in payments systems benefits all participants in the payments ecosystem. End users, including consumers, merchants, governments, and other types of enterprises, find it easier to make and accept payments. Providers to these end users, including banks, networks, processors and other service providers, gain revenue from payments in interoperable systems that they may not be able to achieve with closed loop (or noninteroperable) systems. Interoperability in payments systems can also produce cost efficiencies and enable superior risk management. Interoperability of multi-party systems, however, rarely happens on its own. Independent development efforts may produce processes or use technologies that are not compatible, and, often, market competitors have reasons to hope that interoperability will not occur, and that their proprietary solutions will “win.”

This paper identifies three ways interoperability in payments systems can be achieved: (i) through simple scheme interoperability, (ii) by connecting networks through network interoperability, or (iii) by creating a business environment that enables parallel system interoperability to occur.

CGAP is a global partnership of more than 30 leading development organizations that works to advance the lives of poor people through financial inclusion. Using action-oriented research, we test, learn and share knowledge intended to help build inclusive and responsible financial systems that move people out of poverty, protect their economic gains and advance broader development goals. We research and experiment to achieve proof of concept and extract lessons that can be built to scale by our partners, who apply our insights in the marketplace.

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