Regulation and Payment System Governance

This document provides an overview of how countries have leveraged the spread of digital technologies and infrastructure to improve governance, including by digitizing identification systems, social safety net services such as unconditional cash payments, and government response during emergencies (including during the COVID-19 pandemic). The document also outlines key risks associated with digitization. The document…

This publication explores big tech firms entering financial services can scale up rapidly with user data from their existing business lines in e-commerce and social media, and by harnessing the inherent network effects in digital services. In addition to traditional policy concerns such as financial risks, consumer protection, and operational resilience, the entry of big…

Financial sector digital evolution has seen increasing changes with a move towards technology driven delivery channels, and the explosion of mobile into the financial sector aided to scaling online banking through digital apps and enabled innovation of new DFS products and services, further driven by the entry non-banks including the telecom or mobile money operators…

This report by Next Billion addresses the third ecosystem pillar – the institutional/regulatory component, with specific focus on the legislation, policies, and regulations. The policy analysis unearthed critical policy constraints and guided by the doctrinal interpretations of existing laws, market-enabling policy solutions evolved. Our presentation focuses on material financial inclusion issues, the guiding laws, and…

This toolkit by CENFRI provides a step-by-step guide on encouraging and facilitating innovation in respective markets whilst upholding the safety of insurance consumers. The supervisory toolkit will help regulators navigate their role and guide decisions in regulating for innovation.

This report  by FSD Africa presents the results of the evaluation study on bank and non-bank agents and the users of their services in Maputo City and Province in Mozambique.

When financial sectors are buffeted by sudden and dramatic external shocks, regulators strive to implement targeted regulatory responses to mitigate negative impacts — and the shocks made by the pandemic were no exception. The aim of this policy report  by The Centre for Financial Inclusion is to examine the types of regulatory flexibility adopted in…

Elevating the collective voice of digital financial services (DFS) consumers can give them more say and more power in the financial sector. Through a stronger consumer voice, regulators will gain a better understanding of the risks facing consumers and adapt regulations accordingly, thus making financial services more responsible. Through its research, CGAP identified three opportunities…

How regulation should evolve to encourage fair competition between traditional banks and new fintech and big tech players is now being debated. Some advocate moving from an entity-based to an activity based regulatory approach under the principle “same activity, same regulation”. However, there is only limited scope for further harmonising the requirements for different players…

What is a regulatory sandbox? A formal regulatory initiative: ➢ to test innovation ➢ in the live marketplace ➢ on a time- and scope-limited basis ➢ to determine the appropriate regulatory treatment/status ➢ before the innovation can fully operate in the marketplace …where other options fall short This visual guide from CGAP walks you through…

Nolwazi Hlophe from the Digital Frontiers Institute talks about financial inclusion, connecting Africa to the world through FinTech and education in rural communities. A great chat about innovation, education, and everything financial in between. Have a listen here!

This case study highlights some key factors that can contribute to the development of responsible digital credit guidelines for regulators and DFS providers, based primarily on the Tanzanian digital credit experience.

The rise of fintechs promises to spur competition in the financial sector. This could lead to sizeable efficiency gains, more choice for consumers, and enhanced financial inclusion. However, the potentially disruptive growth of firms offering novel products and services poses new challenges for financial stability and consumer protection. In response, policymakers around the world are…

A proper functioning agent network is critical for the overall growth, performance, and sustainability of any Digital Financial Services (DFS) ecosystem. It is critical to ensure that agent networks are properly set up, well-managed, effectively regulated, and supervised in a prudent manner to ensure that the customers they serve, receive suitable high-quality products and services,…

This paper states the Bank’s policy for providing settlement services to payment systems, for providing settlement accounts in sterling in the Bank’s Real Time Gross Settlement (RTGS) system and for granting access to intraday liquidity.

Regulatory sandboxes have attracted significant attention for their potential to empower financial regulators struggling with fast-paced innovation. Through a sandbox, regulators can carefully monitor digital products, services and business models in a live testing environment, enabling firms to bring innovations to market more quickly and readily. But when and under what circumstance sandboxes are the…

This case study examines the role of financial institutions in achieving the UN SDGs through socially responsible finance (SRF), a broad range of political and commercial adjustments aimed at ensuring financial systems protect society and the environment.

This webinar organised by Digital Finance Professionals Ghana, discussed global trends in the DFS space and highlight strides that Ghana has chalked in growing its DFS market. Panelists for the webinar were: Derek B. Layrea – Head, Research and Communications, of Telecoms Chamber David Porteous – Chairman of Digital Frontiers and CEO of BFA Global…

A COVID-19 policy response framework to recover and adapt. COVID-19 is leaving no country unaffected. The global scale of the pandemic is affecting trade, capital flows, tourism and remittances, while lockdown or other measures to contain the spread of the virus are affecting domestic output and livelihoods. Sub-Saharan Africa (SSA), where most economies were in a…

The global pandemic COVID-19 and the ensuing emergencies have reinforced the urgency of using Digital Financial Services (DFS) to preserve the functioning of financial systems and the security of people during the period of declining demand, reduced supplies, and tightening credit terms. Digital payments, particularly when accompanied by digital financial Infrastructure and enabling regulations, help…

Financial regulators are challenged to respond to the innovation opportunities presented by financial technology (fintech). Current rules are not necessarily sufficient or effective to adequately regulate new business models and new products relating to innovations such as crypto assets or digital financial services. Regulators that fail to respond in a timely manner may drive innovation…

Ghana became the first country to launch a digital financial services (DFS) policy. While the policy has been years in the making, the government hopes the policy will support various measures it is taking to leverage DFS in its COVID-19 response. Developed with technical support from CGAP and funding from the Swiss State Secretariat for…

Financial policymakers and regulators in emerging and developing countries are mindful of the potential that FinTech holds for financial inclusion. While there is an increasing global convergence on the debate about and  implementation of regulatory and supervisory responses to these business model innovations, knowledge on how to deal with the risks of fast-moving technologies remains…

In this report, DFS innovations can rapidly expand financial access and inclusion, but also pose risks related to fraud, market abuses, and financial stability. Regulatory frameworks thus need to strike a balance between fostering innovation, protecting consumers, and addressing the potential for unintended consequences of technological disruption. They must also ensure the market is a…

A key regulatory enabler for building inclusive digital financial services is creating a special licensing window for electronic money issuers (EMIs). Because EMIs have a lower risk profile than banks, they require less regulatory oversight. A special licensing category that recognizes that their role is to store customer funds converted into e-money held in basic…

In many emerging economies, digital financial services markets are limited to one or two major providers, reducing innovation, customer choice and potentially facilitating monopolistic or cartelistic behavior. Why are DFS markets prone to concentration? Is this a problem? In this primer, CGAP applies a framework to help answer these questions and demonstrate how regulation can have…

In many emerging economies, digital financial services markets are limited to one or two major providers, reducing innovation, customer choice and potentially facilitating monopolistic or cartelistic behavior. Why are DFS markets prone to concentration? Is this a problem? This paper from CGAP applies a framework to help answer these questions and demonstrate how regulation can…

The Doing Business 2020 study shows that developing economies are catching up with developed economies in ease of doing business. Still, the gap remains wide. An entrepreneur in a low-income economy typically spends around 50 percent of the country’s per-capita income to launch a company, compared with just 4.2 percent for an entrepreneur in a…

The excitement around fintech in India is palpable. This enthusiasm can be attributed to fintech’s potential as a market-led solution to the policy objective of financial inclusion. Fintech can expand the reach of formal finance by offering users personalized financial products in an economically viable manner. Unsurprisingly then, regulation of fintech is central to financial…

AFI network’s knowledge and experience in applying various e-Money policies and regulatory approaches have had a significant impact in advancing financial inclusion. It has helped create enabling environments for the deployment of innovative financial services by building resilience in the financial systems and protecting clients in this spectrum of electronic money services. The E-Money Policy…

The Basel Framework is a consolidated version of the full set of standards of the Basel Committee on Banking Supervision (BCBS), which is the primary global standard setter for the prudential regulation of banks. The membership of the BCBS has agreed to fully implement these standards and apply them to the internationally active banks in their jurisdictions.

Regulators play a significant role in catalyzing or impeding a country’s progress toward financial inclusion. By evaluating five domains of the regulatory environments in 55 countries (i.e., government and policy support, stability and integrity, products and outlets, consumer protection and infrastructure), the Global Microscope identifies each country’s current policies and regulations and notes which are…

During the past several years, market participants, regulators and policy makers have increasingly focused their attention on issues concerning sustainable finance in its many forms. These issues are particularly relevant for growth and emerging markets as they seek to develop capital markets in their jurisdictions. Accordingly, in late 2017, IOSCO’s Growth and Emerging Markets Committee…

This focus note from Cenfri aims to equip regulators with a decision framework that illustrates the available tools required to regulate for innovation. Digital innovation is changing the nature of financial markets. Innovation can create opportunities, enhance efficiencies, increase competition, drive scale, and improve the reach and value of financial products and services to consumers.…

The Bill & Melinda Gates Foundation’s Financial Services for the Poor Program (FSP) believes that effective financial services are paramount in the fight against poverty. Nonetheless, today more than 1.7 billion people live outside the formal financial sector. Increasing their access to high quality, affordable financial services will accelerate the well-being of households, communities, and economies in…

The lessons learned from the NPCI success story can be useful for policy makers in financial inclusion and other markets. Some factors illustrated in the NPCI story include: An industry-led approach to ownership and governance, with strong regulator backing. Competitive economics through a utility model, mixed with smart growth and a start-up culture. A strategy of incremental,…

Financial inclusion in Jordan has increased from 24.6% in 2014 to 33.1% in 2017. 13.2% are informally served and 38 % remains excluded. Realizing that inadequate access to and usage of financial services limits opportunities to start and grow a business, create jobs and gain access to inputs, equipment, skills and knowledge, the Central Bank…

Broadening financial inclusion has been a social, economic and political priority in South Africa since 1994, but we now recognise that meaningful inclusion goes way beyond ensuring someone simply has a bank account. The promise of digital channels and digital transactions is that they will truly democratise the financial system for the benefit of all.…

The United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGA) published a report reviewing some early lessons on regulations that provide an enabling environment for FinTechs. FinTech has the potential to increase financial inclusion globally and transform lives. Countries need regulations in place to manage risk and consider new approaches to regulation, such…

Although a specialized regulatory window for e-money issuers (EMIs) has been recognized as a key regulatory enabler for inclusive digital financial services, regulation alone is not enough. It needs to be complemented by an efficient and effective supervisory regime to enforce compliance. While there is a solid body of evidence about how to regulate EMIs, much less…

Digital financial services (DFS) are growing at a rapid rate and provides the opportunity to reach more clients, including the under-served. It has a significant role to play in both financial inclusion and economic development, but it is challenging in particular for regulators due to the fast pace of change and innovative approaches. This Regulatory Diagnostic…

This two-part note series explores the state of national and regional payment systems in sub-Saharan Africa (SSA).

This paper covers regulatory reporting initiatives at 10 financial authorities that are implementing or have implemented innovations in their data collection frameworks. Most authorities are implementing innovations in terms of data standardisation and granularity of required reporting data. Around half are implementing innovations in the means of data transmission and transformation rules. Only a few…

The World Bank’s Global Payment Systems Survey (GPSS) surveys national and regional central banks and monetary authorities on the status of payment systems. The GPSS is the only global survey that combines quantitative and qualitative measures of payment system development and covers all aspects of national payment systems – from infrastructure and the legal and…

As of 2018, more than 90 countries have publicly committed to promoting financial inclusion—and the number will continue to grow. Financial regulators and supervisors in these countries are discovering the value of a structured approach in helping them to implement policies and strategies on financial inclusion (I) alongside their core responsibilities to promote micro- and…

The 2018 Global Microscope shows countries in Latin America and Asia have the most conducive environments for financial inclusion. It is is a benchmarking index that assesses the enabling environment for financial inclusion in 55 countries. This edition, with a revised research framework, offers a forward-looking focus on the digital financial services now and in…

Across the globe  industries, businesses are collecting, storing and using increasing amounts of consumer data. This has been made possible by the growth in the reach of the internet, particularly through smartphone penetration, and the increased capacity to collect and share data on individuals. The technological developments in data analytics have increasingly allowed businesses to…

The digitalisation of financial services creates many opportunities, including increasing financial inclusion and reaching the under-served population. Concerns are now raising with regards to data and the security of our information in this increasingly digital world. The goal of this research, conducted by CFI Fellow Patrick Traynor, is to examine how well digital lenders are responding to…

This article from Federal Reserve Bank of St. Loius, examines the relationship between payment systems and Priviacy. Privacy in payments is desired not just for illegal transactions, but also for protection from malfeasance or negligence by counterparties or by the payments system provider itself. Proposals to abolish cash take inadequate account of these legitimate demands…

Digital financial services (DFS) differ from traditional financial services in several ways that have major implications for regulators. The technology enables new operating models that involve a wider range of actors in the chain of financial services, from design to delivery. The advent of DFS ushers in new providers such as nonbank e-money issuers (EMIs),…

This Report from the Commission to the European Parliament and the Council is on the implementation and impact of Directive 2009/110/EC in particular on the application of prudential requirements for electronic money institutions.

“Payments Systems in the U.S.” is a comprehensive description of the payments systems (cards, checks, ACH, wires, and cash) that move money between and among consumers and enterprises in the U.S. In clear and lively writing, the authors explain how the payments systems work, how they evolved, who uses them, who provides them, who profits…

There is growing interest in understanding the impact of regulatory changes on financial inclusion. While a regulatory impact assessment (RIA) has become an integral part of law making in many OECD countries, it is still a relatively new concept in emerging and development economies and there is little precedence of conducting an RIA on regulatory…

CPMI-IOSCO Principles for Financial Market Infrastructures (PFMI) were published in April 2012 by the Committee on Payment and Market Infrastructures and the Technical Committee of the International Organisation of Securities Commissions (CPMI-IOSCO). FPSL is considered an FMI by the Bank of England and therefore must adhere to applicable principles by completing an annual self-assessment and…

Financial technology (‘FinTech’) is transforming finance and challenging its regulation at an unprecedented rate. Two major trends stand out in the current period of FinTech development. The first is the speed of change driven by the commoditization of technology, Big Data analytics, machine learning and artificial intelligence. The second is the increasing number and variety…

In this note, Capgemini explores the business risks and opportunities for banks arising from the forthcoming implementation of the EU’s revised Payments Services Directive. PSD2 enforces an implementation deadline of January 2018. For those banks already progressing in their digital transformation, this is a reasonable timeframe to incorporate the nexessary technology and business change. For…

Credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maximise a bank’s risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. Banks need to manage the credit…

This paper from GSMA gives an overview of financial regulation including AML and KYC in the context of mobile money transfers.  

This paper from the GSMA focuses on how regulators can effectively safeguard customer funds when a nonbank issues mobile money. In countries where this is permitted, regulators and nonbank mobile money issuers have taken a number of steps to mitigate the risk that the latter will be unable to reimburse their customers. The purpose of…

Most policy makers, donors, and private investors involved in microfinance now appreciate that poor and low-income people, like the rest of us, need a variety of basic financial services, not just credit. The ability of the market to respond to this demand depends not only on providers developing sustainable, low-cost ways to provide such services,…

This focus note from CGAP explores policy and regulation proposals for curbing debt stress. It argues that it is preferable to implement appropriate monitoring mechanisms and regulatory interventions at an early stage in credit market development, to detect potential debt stress and prevent reckless lending practices, thereby avoiding risks to financial markets, consumers, and the…

To date, limited research has been undertaken about how providers identify, classify, and manage risks related to the use of agents and how supervisors assess providers for that matter. Further, this is an area that continues to develop rapidly alongside the dynamic path of evolution of financial inclusion through digital means and the increasing types…

These notes offer details on CGAP’s findings and recommendations as a result of a branchless banking policy and regulatory diagnostic carried out in late 2008 in El Salvador.

This update of CGAP’s 2008 “Notes on Regulation of Branchless Banking in Brazil” incorporates research conducted by CGAP in January 2010. It is one of 11 country updates produced by CGAP as a part of the G20 Access through Innovation (ATI) Sub-Group’s workplan.

The Sistema de Pagos Electrónicos Interbancarios (SPEI) is an important pillar of a complex payment and securities settlement infrastructure, through which the payments of various markets are settled with finality. In 2015, SPEI processed transactions for the equivalent of 10 times the country’s gross domestic product (GDP). It is supported by well-founded legal basis, and…

This paper by Ignacio Mas looks at deposit insurance in developing countries. About a dozen developing countries have deposit insurance systems and several others are considering establishing them. These systems are typically created to prevent contagious bank runs, to provide a formal national mechanism for handling failing banks, and to protect small depositors from losses…

Technology, and in particular the spread of real-time communications networks, permits banks to delegate ‘last mile’ cash management and customer servicing functions to third-party retail outlets. By making basic deposit, withdrawal, and payment functions available securely through retail shops that exist in every village and neighborhood, there is an opportunity to dramatically increase the physical…

This transcription is of Henry Ergas’s discussion of the papers that were presented in the Panel on Competition Policy in Card-Based Payment Systems session of the Antitrust Activity in Card-Based Payment Systems: Causes and Consequences conference.

Most of this report is descriptive and analytical, explaining why and how central banks oversee payment and settlement systems. It looks at the need for oversight, the source of central banks’ responsibilities for oversight, the scope of oversight and the activities that oversight involves. In addition it looks at cooperative oversight, where more than one…

The report considers the concepts and development factors that formulate the framework and context for the general guidance. Section 3 presents the general guidelines on payment system development in separate sections for banking, planning, institution-building and infrastructures. Each guideline includes a descriptive statement, an explanation of its primary role in CPSS – General Guidance consultative…

This report discusses findings of a market review into the ownership and competitiveness of infrastructure that supports the three major UK payment systems: Bacs, Faster Payments Service (FPS), and LINK.

Branchless banking solutions in most countries tend to be dominated by a few large players, and exhibit low levels of innovation. The paper argues that there is a need to evolve the regulatory framework for branchless banking from one that enables participation by banks and telcos to one that fosters competition by a broader range…

The National Payments System (NPS) controls how participants at all levels — from the person on the street to banks, governments and international participants — exchange value within an economy and across national borders. In practice, the NPS is the framework of laws, regulations, systems, mechanisms, procedures and agreements (commercial, process and risk management) that…

Poor regulation is one of the major obstacles to financial inclusion. Others include lack of good infrastructure, weak institutions and poor cooperation, and unstable economic and political conditions. The report of CGD’s Financial Access Task Force, however, focuses solely on regulatory issues for two main reasons. First, regulatory changes often are needed to enable the successful…

This handbook has been designed to assist those responsible for regulating and supervising the use of DFS in emerging markets. A conservative one-size-fits-all regulatory approach is not appropriate for DFS because it is likely to stifle innovation, discourage new market entrants and inhibit the use of DFS to improve financial inclusion. By analysing the nature,…

To date, limited research has been undertaken about how providers identify, classify, and manage risks related to the use of agents and how supervisors assess providers for that matter. Further, this is an area that continues to develop rapidly alongside the dynamic path of evolution of financial inclusion through digital means and the increasing types…

Reforms in the area of retail payments are becoming increasingly important. Given the nature of retail payment systems and the structure of the retail payments industry, there are multiple challenges and roadblocks that impede those much needed reforms. Navigating through these challenges requires a comprehensive and strategic approach. In this document, the Payment Systems Development…

Governments, regardless of their country’s stage of economic development, make payments to, and collect payments from individuals and businesses. Financial resources are also transferred between the various government agencies. These flows cover a wide range of economic sectors and activities, and in most cases the overall amount of such flows is significant, for example in…

The Principles for Financial Market Infrastructures are the international standards for financial market infrastructures, ie payment systems, central securities depositories, securities settlement systems, central counterparties and trade repositories. Issued by the CPMI and the International Organization of Securities Commissions (IOSCO), the PFMI are part of a set of 12 key standards that the international community considers…

This paper discusses issues related to regulation of branchless banking targeting the unbanked poor. Based on research from seven countries in Asia, Africa, Central Asia, Europe and Latin America, it observes that policymakers and regulators in developing and transition economies are increasingly embracing transformational branchless banking.