Volume 16 (2022)

Each volume of Journal of Payments Strategy & Systems consists of four 100-page issues, published both in print and online. 

The Articles published in Volume 16 include:

Volume 16 Number 4

  • Editorial: 
    Gerard Hartsink, Editor, Journal of Payments Strategy & Systems
  • Practice papers
    Why are open banking models in Europe underperforming?
    Gorka K. Briones de Araluze, Partner, Monitor Deloitte

    This study investigates the foundations underpinning open banking models in Europe and identifies levers to improve their performance. Based on a review of the literature, it distinguishes four contexts for open banking: platformisation, data sharing, FinTech and regulation. The users of open banking services are surveyed to determine factors driving adoption and identify those entities that customers trust with their data and funds. The results indicate that the slow adoption of open banking services is in large part due to customers’ poor understanding of such services. The results also show the importance of usefulness and trust in driving adoption. These findings highlight the disproportionate attention being given to service provider infrastructure and the ecosystems of new entrants, and indicate that more consideration should be given to the actual users of open banking frameworks. In response to the findings, the study proposes a roadmap to mitigate the main weaknesses in current open banking models. The conclusions of this study are relevant not only to the development of open banking regulations in other territories, such as the USA and Canada, but also to the extension of data-sharing regulations to non-banking sectors.
    Keywords: open banking, open finance, data sharing, technology acceptance model, trust, Digital Markets Act

  • Open banking and digital transformation in Italy: The current situation and the challenges ahead
    Liliana Fratini Passi, Director, CBI S.C.p.a

    This paper discusses the results of the Global Open Banking Report, released by CBI and PricewaterhouseCoopers in December 2021. Starting with a brief review of the current state of open banking at the global level, the paper switches focus to the European scenario and on the Italian market in particular, highlighting the disruptive nature of open banking, and its potential for significant growth. The study finds that although open banking is still in a development phase in Italy, banks and other players are constantly exploring collaborative initiatives and investing in innovative services that go beyond the traditional banking sector, marking a transition from open banking towards open finance.
    Keywords: open banking, financial services, FinTech, digital payments, account information services, payment initiation services, value-added services

  • Digital euro issuance: A great opportunity with some risks
    Leopoldo Esposito, Associate Lawyer, Orrick

    As new digital payments technologies such as cryptocurrencies emerge, the European Union has sought to provide cohesive and coherent solutions to protect its citizens from the risks associated with such instruments. In this context, this paper discusses the role of a possible digital euro as a tool to serve citizens on the one hand, and to protect monetary sovereignty on the other. To this end, the paper examines recent progress in the domain of central bank digital currencies, and assesses the considerations and risks involved. In particular, it discusses the legislative considerations relating to the possible introduction of a digital euro, ie whether the European Union and its institutions are already endowed with the sovereignty necessary to issue a digital euro, or whether ad hoc legislative intervention is necessary to legitimise the issuance of such a new instrument. The paper then goes on to assess the risks and benefits associated with the issuance of a digital euro. Finally, it will analyse the possible forms that a digital euro could take, evaluating the pros and cons of each. The conclusions will highlight how the introduction of such a new instrument provides an opportunity to be seized and exploited.
    Keywords: banking law, digital euro, digitisation, central bank digital currencies, CBDC

  • Key milestones for participants in the T2-T2S consolidation project: A template for banks that are onboarding to any financial market infrastructure
    Robert Bashford, Principal Market Infrastructure Expert and Chiara Ciraso, Market Infrastructure Specialist, European Central Bank

    The various systems that provide services to the financial industry for trading, clearing and settlement, matching of financial transactions and depository functions are known as financial market infrastructures (FMIs). Within Europe, such FMIs include the Eurosystem’s TIPS, TARGET2 and T2S. TARGET2 will be superseded in March 2023 by a new real-time gross settlement system called T2, with a view to optimising liquidity management across all TARGET services. For a large-scale implementation such as this it is important to provide an onboarding plan for customers. To this end, a set of milestones to guide system participants towards the intended go-live of November 2021 (now postponed to March 2023) has been published. This paper examines the milestones document through the lens of project management theory and recommends the use of said document, and the milestones within, as a template for participants onboarding to any FMI. FMI operators will also find the document useful when preparing to onboard their own customers.
    Keywords: RTGS, liquidity management, payments, financial market infrastructure, project management, project milestones, customer onboarding

  • The future of cross-border wholesale payments: Mobilising central bank money across borders
    Ruth Wandhöfer, Financial Industry & Technology Expert

    Large-value cross-border payments constitute the life-blood of international trade and commerce and are thus crucial to national economies. This paper explores this high-value payment ecosystem, which has become more complex and expensive following the prudential regulatory reform rolled out in response to the global financial crisis. Recent technology innovations, in particular the emergence of blockchain and distributed ledger technology, have led to the creation of a parallel system of value transfers based on crypto currencies. The combination of cloud computing, software innovations and the increased use of application programming interfaces has enabled the creation of new business and technology models that are innovating this space. On top of this, the arrival of central bank digital currencies may have the potential to support cross-border payments, both retail and wholesale. This paper explores how far these developments can support a better system for large-value cross-border payments, providing a number of examples of real-world business approaches. A critical lens is applied to gaps outside of the technology field, such as central bank policies and liquidity management, which will need to be closed before true innovation can occur at scale.
    Keywords: cross-border wholesale payments, correspondent banking, real-time gross settlement system (RTGS), central bank digital currency (CBDC), distributed ledger technology (DLT), high-quality liquid assets

  • How financial inclusion is evolving to make payments easier for all
    Vijay Bedarkar, Environmental, Social and Governance (ESG) Manager and Alison Conway, Group Head of Corporate Development, Trust Payments

    This paper looks at how financial inclusion impacts marginalised communities, focusing on Africa and Asia predominantly, and how the evolution of digital financial services has helped advance the progression of financial inclusion. The paper considers the lessons learned from previous financial inclusion initiatives and provides examples of where some of the risks associated with these initiatives have been mitigated through the use of Big Data to access underserved rural communities or overcome obstacles such as gender bias when designing financial products and services. The paper will also look at options for future activity that could help to overcome some of the challenges created by financial exclusion. The paper will look at specific case studies from mobile money in Africa to female empowerment initiatives globally, including how the COVID-19 pandemic exacerbated existing problems for vulnerable communities but also acted as a catalyst for new and appropriately responsive activity. From working in collaboration, to improved regulation, the need for increased equality across access to digital financial services and the relevant literacy training required, this paper seeks to review what the previous landscape of financial inclusion technology looked like and how it can evolve.
    Keywords: financial inclusion, gender imbalance, digital financial services, COVID-19, financial exclusion, social impact, ESG, CSR

  • Country Report
    The dawn of next-generation payment infrastructure: The future of Zengin and financial services in Japan
    Eiichiro Yanagawa, Senior Analyst, Celent

    Countries and regions around the world are accelerating their efforts to evolve and advance financial market infrastructure. Against this backdrop, it is incumbent on Japan’s Zengin System to move beyond simply offering a 24/7 real-time payment infrastructure. Instead, through providing value-added services and connecting non-banks (payment service providers) and their diverse service offerings, the focus should be on evolving a next-generation payment system and fostering an arena for financial service innovation in next-generation financial services. This paper investigates the initiatives and challenges for upgrading financial market infrastructure in Japan; how the framework for Japan’s next-generation payment infrastructure has evolved; and how to tackle the future vision for financial services.
    Keywords: payment infrastructure, Zengin System, financial electronic data interchange (EDI), expanded hours of operation, API, faster payments, high-frequency and low-value payments, Cotra Project, funds transfer service providers

Volume 16 Number 3

Special Issue: Next steps for cross-border payments

  • Editorial: 
    Gerard Hartsink, Editor, Journal of Payments Strategy & Systems
  • Opinion/Comment
    Next steps for cross-border payments: Aligning ambition with action
    Klaas Knot, Chair, Financial Stability Board and President, De Nederlandsche Bank
  • Practice papers
    The G20 cross-border payments programme: A global effort
    Thomas Lammer, Deputy Head, CPMI Secretariat and Tara Rice, Head, CPMI Secretariat, Bank for International Settlements

    The G20 cross-border payments programme is a globally coordinated endeavour that aims to address long-standing challenges in the cross-border payments market. This paper reviews those challenges and discusses the 19 ‘building blocks' that make up the programme. As the paper describes, each building block will provide notable benefits for cross-border payments; however, due to their interdependencies, the most significant enhancements will only be realised if public authorities and private actors across the globe work together to implement improvements in a coordinated manner. This paper reviews the programme's achievements to date and discusses key findings from related projects that provide useful insights for the programme going forward.
    Keywords: cross-border payments; payment systems; interlinking; CBDC; foreign exchange; central banks; ISO 20022

  • The Nexus international payments platform: Is it business-model viable?
    Chusu He, Lecturer in Finance, University of Bath, Alistair Milne, Professor of Financial Economics, Loughborough University and Markos Zachariadis, Professor of Information Systems, Alliance Manchester Business School

    This paper examines the BIS Technology Hub's Nexus project. Nexus is a proof-of-concept for a messaging platform that supports near real-time international payments by linking together domestic ‘instant’ payment platforms. Two aspects of Nexus are distinguished: (1) the innovations in technology and messaging standards to support instant payment services internationally, deal with anti-money laundering and sanctions compliance, and support transparency of foreign exchange pricing and payments charges; and (2) its novel organisational architecture with two associated new business models for the execution of international payments. As the paper will discuss, it is unclear whether these new business models will be commercially viable. Likewise, the extent to which the improvement of international payments must be based on new operational architectures rather than the enhancement of existing correspondent banking-based arrangements remains uncertain. The paper therefore argues that these aspects should be developed separately, so that banks and payment services providers are free to use Nexus messaging in conjunction with their existing bilateral commercial and operational relationships to support the linkage of domestic instant payment platforms, as well as to use the Nexus platform itself, if and when it achieves a commercial launch.
    Keywords: correspondent banking; cross-border payments; instant payments; faster payments; payments innovation; payments platforms

  • Cross-border retail payments in the Tripartite Area in support of the African Continental Free Trade Agreement
    Juliet Rugeiyamu Kairuki, Managing Director and Arthur Cousins, Lead Payments Consultant, FINSYS

    Cross-border payments initiatives are rapidly proliferating on the African continent. Both banks and non-bank financial institutions are working to extend digital financial services to support the growing demand for the transfer of funds across borders, including remittances, which provide a lifeline for vulnerable households such as those supported by working migrants. This article provides insight on the concept of a cross-border retail payments scheme for credit transfers within a geographical area of the African continent known as the Tripartite Free Trade Area. The paper elaborates on how such a scheme can be utilised to guide the delivery of payments in a manner that is cost-effective, rapid and transparent. This proposed scheme is in line with the G20 Roadmap for Interoperable Payments and would also support the vision of the African Continental Free Trade Area to enhance intra-African trade.
    Keywords: regional clearing and settlement; Africa; remittances; low-value payments; Southern African Development Community; East African Community; Common Market for Eastern and Southern Africa; cross-border payment schemes

  • A path towards enhancing cross-border payments: Breaking down the realities
    James Barclay, Executive Director, Industry Product Manager, J.P. Morgan, Payments and Masayuki Tagai, Managing Director, Industry Issues Executive (APAC), J.P. Morgan, Payments

    If the future of payments, as envisaged by the Financial Stability Board, is to be delivered, it will require industry and regulatory investment. Improvements will be incremental and slow in adoption unless a number of significant challenges outside pure technical capabilities are addressed. These challenges are a result of diverse national legal and regulatory regimes; varying standards and practices in financial messaging; the different channels for reaching end users; the difficulty of interlinking multiple retail payment systems; data management and storage constraints; supplier and network oversight; and, not insignificantly, clarity on the business case for change, when revenue for payments is on the wane. This paper evaluates the importance and implications of managing these challenges in a way that does not increase the levels of risk in payment processes and, most importantly, does not impede the ability of the authorities to manage financial stability. It proposes the selection of a few key corridors with high volumes of worker remittances and the development of path-finding market practices as a prelude to agreed global standards. Finally, the paper concludes with a few ideas on what cross-border payments could look like by 2030.
    Keywords: cross-border payments; regulation, harmonisation; standardisation; transparency; access; speed

  • Synchronising instant payment systems to improve cross-border payment execution
    Erwin Kulk, Head of Service Development and Management, EBA CLEARING and Steve Ledford, Product Executive, The RTP® Network, The Clearing House

    Although instant payment systems have been successfully launched the world over, to date they have had only a local or regional impact. This paper presents the case for leveraging local instant payment systems to enhance cross-border payments. Specifically, it argues that by connecting the instant payment systems in both sending and receiving currency zones, and synchronising settlement between these systems, it should be possible to obtain a cross-border payment experience that aligns closely with that of domestic and regional instant payment systems in terms of speed, certainty and predictability. The paper describes the first practical steps taken by EBA CLEARING, The Clearing House and SWIFT to realise an immediate cross-border payment concept in the US dollar and euro corridor, which could be replicated across other currency corridors and instant payment systems. While much has already been done to take cross-border payments to the next level, there remain a number of frictions that will require both private and public sector action.
    Keywords: cross-border payments; instant payments; request to pay; request for payment; ISO 20022; sanctions screening

  • The internal cards market in Europe from 2002 to 2020: A success or a failure?
    Diederik Bruggink, Head of Innovation and Payments, European Savings and Retail Banking Group

    This article evaluates the history of the internal payment cards market in Europe from 2002 to 2020. It finds that despite such initiatives as EAPS, Monnet and PayFair, the European card industry has failed to create an independent pan-European card scheme. Thus, although Europe enjoys a unified payments market, with well-functioning domestic cards markets, pan-European cards acceptance across the Single Euro Payments Area is entirely reliant on co-branding with international (ie non-European) card schemes. While cards have become the most commonly used cashless payment product in the European internal market, the European payments industry has failed to deliver on policy objectives regarding sovereignty in the European payments market.
    Keywords: SEPA; internal market; cards; card schemes; European sovereignty in payments

  • Managing the rising tide of settlement risk in cross-border payments and the future development of CLS
    Marc Bayle de Jessé, Chief Executive Officer, CLS

    Cross-border payments sit at the heart of international trade and economic activity and typically involve the settlement of a foreign exchange (FX) transaction requiring the payment of one currency for the receipt of another. One of the main risks in such transactions — settlement risk — is that one party delivers the currency it has sold but does not receive the currency it has bought from its counterparty, resulting in a loss of principal. Because many currencies are paid at different times of the day, there may be a significant gap between the payment of one currency and receipt of the counter-currency. This paper will highlight the current rise in settlement risk associated with cross-border payments and the reasons behind this phenomenon, as well as how settlement risk can be addressed through payment-versus-payment (PvP) settlement, which ensures the final transfer of a payment in one currency occurs only once the final transfer of a payment in another currency has taken place. Given the projected growth in cross-border transactions, the paper concludes that the mitigation of settlement risk is crucial and that, for now, this is best tackled by following the recommendations in the FX Global Code, namely to settle eligible currencies via PvP, and for non-eligible currencies, leverage netting solutions.
    Keywords: cross-border payments; FX settlement risk; global code; PvP settlement; netting; risk mitigation

  • Developments in industry standards for cross-border payments
    Michael Knorr, Head of Payments and Liquidity Management, Wells Fargo Bank, NA

    The Committee on Payments and Market Infrastructures has outlined 19 pillars for improving cross-border payments and payment standards, calling for common standards to reduce cost and allow more competition, innovation and transparency. This paper discusses the history and context of payment standards, their benefits, and future developments in the field.
    Keywords: ISO; ISO 20022; standards; ISO 8583; payments; ISO 4217; digital economy; LEI

  • Lessons learned from monitoring the costs of international remittances and global efforts to lower costs
    Oya P. Ardic, Senior Financial Sector Specialist and Harish Natarajan, Lead Financial Sector Specialist on Payments and Market Infrastructures, World Bank

    International remittances constitute an important source of income in many developing economies. However, the cost of a remittance transaction can be high, especially relative to the amount sent and the incomes of migrants and receiving families. As such, reducing the cost of remittances has been a part of the international development agenda. This paper provides an account of the development of targets for remittance cost reduction in the international fora, and the ongoing efforts for monitoring remittance costs. In doing so, the paper describes the World Bank-managed Remittance Prices Worldwide database, which has become the primary tool for measuring progress towards the remittances targets, along with the lessons the World Bank has learned from developing and managing this database. The paper also discusses specific country-level actions that have been effective in improving the remittances market and services, with a focus on small states where remittance costs remain higher than the global average.
    Keywords: remittances; migration; financial inclusion

  • A brief history of cross-border payments
    David O’Mahony, Analyst, Australian Payments Network

    This paper discusses key moments in the evolution of cross-border payments, from the early beginnings of money through coins, notes and bills of exchange, all the way up to the modern era, to provide a brief history of the last 4,000 years of cross-border payments.
    Keywords: correspondent banking, bill of exchange, card schemes, RTGS, interlinking instant payment systems, digital wallets, CDBC, DLT

  • Country report
    An overview of developments in South Africa’s payments industry
    Maurits Pretorius, Chief Strategy Officer, Jason Wang, Strategy and Research Manager and Johan Buitendag, Strategy and Research Manager, Payments Association of South Africa

    South Africa has robust interoperable payment systems, and most adults have bank accounts. Societal realities and financial inclusion continue to play significant roles in payments. While cash remains a dominant payment method, digitisation and new payment technologies are responding to the changing demands of consumers and new regulatory requirements. As a result, South Africa continues to modernise its payment systems to comply with ISO 20022 while addressing the needs of those dependent on cash with innovative payment alternatives. This paper discusses the efforts of the payments industry to modernise the country's national payment system to support the South African Reserve Bank's National Payment System Vision 2025 and its goals, including financial inclusion.
    Keywords: payments modernisation; ISO 20022; real-time; digitisation; financial inclusion; NPS Vision 2025

Volume 16 Number 2

  • Editorial: 
    Gerard Hartsink, Editor, Journal of Payments Strategy & Systems
  • Practice papers
    The European Automated Clearing Association and the role of clearing and settlement mechanisms in Europe’s evolving payments landscape
    José M. Beltrán, President and Fred Bär, Secretary General, EACHA

    This paper presents a concise history of the Single Euro Payments Area (SEPA), with particular emphasis on its impacts on clearing and settlement practices, and on the role of the European Automated Clearing Association as a forum to support the standardisation, harmonisation and consolidation of European payment systems. The paper provides policymakers, scholars and practitioners with an introductory overview, and will help readers, especially those new to SEPA, to understand both its history and more recent developments in the euro area. The conclusions highlight the indispensable role of clearing and settlement infrastructures as a backbone for the payment services delivered by banks, as well as the importance of collaboration for infrastructural evolution.
    Keywords: clearing and settlement, payments integration, payments harmonisation, collaboration, SEPA, EACHA, payments infrastructures

  • Forecasting banknote returns in a changing payments environment
    David Cronin, Advisor and Niall McInerney, Senior Economist, Central Bank of Ireland

    This paper provides a model for forecasting cash returns to central banks. Using data from Ireland, the study identifies a recent structural shift in the relationship between banknote returns and cash-based personal consumption expenditure, likely due to the adoption of contactless payments. Projections of banknote returns are informed by three elements: forecasts of personal consumption, the cash share of that spending, and the returns ratio — that is the ratio of (the log of) banknote returns to the (log of) cash-based personal consumption. To illustrate the modelling approach, the study considers the effects of future payment instrument choices and of COVID-19 on consumption to forecast cash returns for Ireland up to 2030.
    Keywords: banknote returns, contactless payments, COVID-19

  • Payment outages: Experiences and issues
    Tanai Khiaonarong, Senior Financial Sector Expert, International Monetary Fund, Ryan Rizaldy, Director, Central Bank of Indonesia and Harry Leinonen, Chief Executive Officer, PSS Consultancy

    Major operational incidents in payment systems suggest the need to improve their resiliency. As payment infrastructures become more digital, integrated and interdependent, with users demanding real-time and uninterrupted services, a higher degree of resilience is required. Risks that could trigger major disruptions have become more acute given the rise in power outages, cyber incidents and natural disasters. International experiences suggest the need to strengthen (1) reliability objectives, (2) redundancies, (3) assessment of critical service providers, (4) endpoint security and (5) alternative arrangements. A comprehensive restructuring of resiliency plans — across the entire payment value chain — is also needed. This paper draws lessons from recent operational incidents to suggest ways in which operational risk management frameworks could be strengthened given evolving payment systems, increasing user expectations, developing technologies and varying country circumstances. The objective is to share observations from international experiences and explore operational and developmental issues to facilitating the stronger operational resilience of existing and future payment systems.
    Keywords: operational resilience, payment systems, risks, disasters, business continuity

  • Designing an inclusive digital euro
    Ludovica Galotto, Economist, Directorate General for Consumer Protection and Financial Education and Maria Iride Vangelisti, Director, Department of Financial Education, Bank of Italy

    This paper discusses how the introduction of a digital euro could motivate those Europeans who are yet to open a transaction account, or who are yet to adopt digital payments, into doing just that. The paper argues that this will require central banks to emphasise the risk-free nature of central bank digital currency. In addition, payment transactions need to be made less expensive and more user-friendly than those offered by private intermediaries. The paper explains the benefits of adopting a digital currency instead of relying on cash alone, such as the ability to send and receive payments remotely, improved security, and greater transparency vis-à-vis historical transactions. After discussing the key design features that a digital euro might adopt, the paper concludes that an account-based digital euro could have a greater impact on financial inclusion than a token-based euro. The more that digital euro accounts are integrated into existing payment systems, the greater the benefits will be.
    Keywords: digital euro, central bank digital currency, electronic money, payment innovation, payment instrument, financial inclusion

  • The payments industry in Australia: Status and future developments
    Andy White, Chief Executive Officer, Australian Payments Network

    The payments ecosystem is experiencing accelerated change, with the COVID-19 pandemic acting as an additional catalyst. This paper looks at the example of Australia, where regulation has been reset to reflect, and future-proof its handling of, these changes. With a focus on regulation, and the modernisation of payments systems, this paper focuses on what these changes mean for legacy payment systems, for the future of cash, and for their end users, especially in terms of their trust and confidence in payments.
    Keywords: payments regulation, real-time payments, ISO 20022, open data, the future of cash, fraud, scams, digital identity

  • Cash demand in times of crisis
    Gerhard Rösl, Professor of Economics and Franz Seitz, Professor of Economics, Technical University of Applied Sciences

    This paper focuses on the role of specific types of crisis (technological crisis, financial market crisis, natural disaster) and their effects on the demand for cash in an international context. As evidence from the last 30 years shows, demand for cash increases during periods of crisis, regardless of the nature of the crisis. The nature of the crisis does, however, determine whether small or large banknote denominations are affected more. This study finds that times of payment uncertainties are associated with increased demand for small denominations, probably reflecting an elevated demand for transaction balances. By contrast, in times of financial crisis or general economic uncertainty, the increased demand for cash is largely the result of consumers taking precautionary actions and building up non-transaction balances; for this reason, there is greater demand for large banknote denominations. This study finds that cash continues to play an important role in crisis management. Whether this function can also be fulfilled by a future central bank digital currency, however, remains to be seen.
    Keywords: cash, banknotes, crises, COVID-19

  • How the Legal Entity Identifier supports the digitisation of business transactions
    Stephan Wolf, Chief Executive Officer, Global Legal Entity Identifier Foundation

    This paper reviews the global market conditions together with the commercial and technical drivers that have created the need for a globally interoperable form of digital identity for legal entities. It recounts the role the Global Legal Entity Identifier (LEI) System is already playing in enabling the clear and unambiguous identification of legal entities for all stakeholders globally, and presents examples of how the LEI is already being leveraged by public authorities in payments use cases around the world. The paper also explores the technical model underpinning the Global Legal Entity Identifier Foundation’s new form of digital organisational identity — the verifiable LEI — before exploring how this can bring new value to the payments industry globally.
    Keywords: LEI, self-sovereign identity, legal entity payments, digital identity, cross-border transactions

Volume 16 Number 1

  • Editorial: 
    Gerard Hartsink, Editor, Journal of Payments Strategy & Systems
  • Practice papers
    Mobile wallet payments in the time of COVID-19: The Indian experience
    Rishi Kumar, Assistant Professor and Vastav Ratra, Student, BITS Pilani, Hyderabad Campus, and Shravanth Mandava, Associate, PricewaterhouseCoopers

    This paper uses an interrupted time-series approach to study the demand for mobile wallet payments in India following the imposition of social distancing measures to contain the spread of COVID-19. The study finds that although the value and volume of mobile wallet payments initially dipped once the restrictions were in place, the rate of increase in both value and volume subsequently rose above pre-pandemic levels. Various factors are likely to have influenced this trend, including inter alia convenience and society’s new-found aversion to transacting in cash.  This paper argues that to continue to benefit from the work carried out by banks and FinTechs to simplify the process of sending and receiving payments, and encourage the sustained use of mobile wallets, policymakers need to provide the right incentives, infrastructure, regulation and strategies.
    Keywords: COVID-19, mobile wallets, India, time series, interrupted time series

  • COVID-19 and point-of-sale payments in Belgium: How the older generation also learned to love contactless
    Ellen Van Droogenbroeck, Guest Professor and Leo Van Hove, Professor of Economics, Vrije Universiteit Brussel

    This paper reports the first publicly available results of Belgium’s newly created Digital Payment Barometer. The results show that, as in other countries, the COVID-19 pandemic triggered a shift towards contactless and, to a lesser extent, mobile payments at the point of sale. Strikingly, however, the biggest jumps in the use of contactless payments are observed in the 65–74 and 75+ age groups. There are also indications that these shifts in behaviour may well outlast the pandemic, as consumer preferences have also changed markedly.
    Keywords: point-of-sale payments, COVID-19, contactless, mobile, Belgium

  • What is money? A lawyer’s perspective on the evolution of the US payment system and dollars in the digital age
    Jess Cheng, Senior Counsel, Board of Governors of the Federal Reserve System and Joseph Torregrossa, Associate General Counsel and Vice President, Federal Reserve Bank of New York

    This paper analyses the current frictions, and opportunities for evolution, in the US dollar payment system, by viewing money through the lens of network effects, interoperability, and their legal underpinnings. It gives a lawyer’s perspective on the workings of the US payment system and lessons from history, including the free banking era. This paper also discusses current developments, such as various central bank digital currency proposals and private sector stablecoin developments, in this context. The goal is to contribute to the discussion around the future of the US payment system, toward greater efficiency that does not risk introducing instability.
    Keywords: US payment system, central bank digital currency (CBDC), Federal Reserve, legal framework, crypto currencies, money, stablecoins

  • Getting the balance right: Crypto, stablecoin and central bank digital currency
    Wilko Bolt, Senior Economist, Vera Lubbersen, Economist and Peter Wierts, Senior Economist, Dutch Central Bank

    The rise of new forms of private money is reviving a long-standing debate on the appropriate balance between private and public interests in money and payments. This paper provides an integrated policy analysis of various digital assets that may function as money, namely, bank deposits, non-backed cryptos, stablecoins and central bank digital currency (CBDC). This paper argues that public and private money need to coexist in order to get the best of both worlds, that is, trust and innovation. Getting the balance right, however, is no easy task. It requires a digital update of public money and the effective regulation of cryptos and stablecoins. This paper argues that convertibility between public and private money should be a leading principle both for the design of CBDC and for the regulation of stablecoins with the potential to be widely adopted as a means of payment.
    Keywords: digital payments, cryptos, stablecoins, CBDC, regulation

  • An introduction to cross-border payments within the COMESA region of Africa
    Andrew M. Wamicwe, Regulatory Director, Mobile Financial Services, Airtel Africa

    Within Africa, cross-border payments are yet to become seamless and efficient, and correspondent banking relationships with multiple intermediaries still dominate the payments arena. The cultural divide between anglophone and francophone countries extends to key differences in legal and regulatory frameworks, governance structures, payment channels and currencies. This paper explores the landscape of cross-border payments and the various associated challenges, emphasising the importance of keeping to a specific journey and focusing on one hurdle at a time. Written against the backdrop of the recently passed Africa Continental Free Trade Area agreement, this paper argues that if Africa is to succeed in its pursuit of an effective cross-border retail payments environment, the various stakeholders involved will have to embrace customer-friendly interfaces, fair pricing, standard operating rules and predictable/reliable payment rails. While it is possible to have differences in infrastructure, as shall be seen in the paper, the adoption of common principles is essential to the development of the sector.
    Keywords: payments, trade, regulatory, channels, correspondent banking

  • Building a global digital identity infrastructure
    Gottfried Leibbrandt, Author and Adviser and Daniel Goldscheider, Chief Executive Officer, yes.com

    This paper lays out the need for an electronic identity infrastructure. After describing the landscape, current alternatives and hurdles to overcome, it proposes a way forward, based on the recently launched Global Assured Identity Network, which leverages existing identity and authentication mechanisms. This network uses an architecture that keeps the customer in full control of their personal data, and is based on OpenID Connect and Financial Grade API. The proposed solution is described in detail, including the way to adoption and the trade-offs and considerations that underpin it.
    Keywords: GAIN, digital identity, digital infrastructure, industry initiative, open standards, OpenID, FAPI

  • Geldmaat: An example of ATM pooling in the Netherlands
    Erik Kwakkel, Chief Executive Officer and Victor de Wolff, Chief Financial Officer, Geldmaat

    Geldmaat was established by ABN AMRO, ING Bank and Rabobank in 2019. After three years of working together, the three banks retired their respective automated teller machines (ATMs) on 1st October, 2021, replacing them with a network of ATMs owned and operated by Geldmaat. By combining forces to create Geldmaat, the banks have ensured that cash will continue to be available and accessible over the coming years. Nevertheless, the future of the cash chain in the Netherlands remains a topic of much discussion. This paper explains the transition process, from the initial steps in the pooling process to the rollout itself, in addition to the services now offered by Geldmaat. It then goes on to discuss the future of the cash infrastructure in the Netherlands.
    Keywords: cash, digitisation, ATM pooling, cash chain

  • Country Report
    Retail payment strategies: The approach in Portugal compared with the European Commission and the Eurosystem
    Rui Pimentel, Head of Unit, Payment Systems Department, Banco de Portugal

    In November 2020, the Portuguese Payment Systems Forum issued the Portuguese Retail Payments Strategy | Horizon 2022. The strategy has been formulated to support the implementation of secure, efficient and innovative payment solutions, while promoting broad accessibility to retail payment services. As this paper will discuss, the strategy envisions 42 initiatives for stakeholders in the payments market. These initiatives fall under four pillars: (1) ensuring consumers are better informed about the payment instruments available to them; (2) fostering the benefits of digital transformation; (3) contributing to a regulatory framework that promotes innovation and efficiency; and (4) driving the adoption of safer payment solutions. This paper describes key initiatives under these pillars, and reports on how the strategy is progressing towards its goals.
    Keywords: payments, strategy, Portugal, Europe, COVID-19, innovation

  • Book review
    Payments and Market Infrastructure Two Decades after the Start of the European Central Bank
    Reviewed by Piet Mallekoote, Independent Consultant