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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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April 3, 2017


Governance Down Under

When I was a product manager responsible for faster ACH, I had a ringside seat to the lengthy maneuvering required to garner sufficient votes to mandate same-day ACH after the first attempt failed. We can anticipate similar maneuvering as we continue making fundamental improvements to payments, including the various initiatives under way around faster payments.

All of this harkens back to a compelling conference presentation that treasury representatives of a very large U.S. retailer gave several years ago. That presentation focused on the potential benefits of adopting a comprehensive, self-regulating governance model like Australia's. The Australian Payments Clearing Association (APCA) offers key payment stakeholders a seat at the table, thus balancing competing interests among parties in the payment chain.

I agree that the APCA could offer a template for any governance model being contemplated in the United States.

The APCA, to paraphrase, characterizes itself as being responsible for managing and developing regulations, procedures, policies, and standards governing payments clearing and settlement. Standing with and behind them is the authority conferred by the Reserve Bank of Australia (RBA), that country's central bank.

The 100-plus APCA members include a broad cross section of financial institutions, major retailers, and payments providers. The APCA board comprises an independent chair, the chief executive officer, two additional independent directors, eight nonvoting appointed or elected directors, and an RBA representative.

The expected completion later this year of a new payments system will be one of the APCA's more noteworthy achievements. The New Payments Platform, or NPP, will offer a low-value, faster payments service. The APCA partnered with 12 financial institutions to fund the NPP's development costs.

The APCA is divided among the following operational areas:

  • Checks
  • Direct debit/credit—is equivalent to ACH in the United States
  • Wire transfers
  • Cash—sets rules for the exchange and distribution of cash among participating financial institutions
  • Card issuers/acquirers—sponsors a forum for collaboration
  • COIN (Community of Interest Network)—offers a shared infrastructure supporting connectivity for payments such as checks, direct debit and credit, cards, bill pay, and others

Here in the United States, the Federal Reserve has already created a couple of agencies with some similar features: a task force on faster payments and another task force focused more broadly on secure payments for legacy and emerging payments. Both task forces include broad representation from financial institutions, payment providers, businesses, consumer groups, regulators, law enforcement, and others. Perhaps the biggest difference between the APCA and these two work groups is the ad-hoc, limited duration of the Fed groups and their mandate, which is limited to an advisory role. But there are some other activities that the APCA handles that here in the United States are handled by various disparate entities, a situation that hampers coordinated action.

What are your views on what, if anything, we should do to enhance payments governance in the United States?

Photo of Steven Cordray  By Steven Cordray, payments risk expert in the Retail Payments Risk  Forum at the Atlanta Fed

April 3, 2017 in payments systems , regulators | Permalink

Comments

Hi, thanks for the complements about our country's payment landscape. However, you seem to have the idea that the New Payments Platform grew organically out of altruistic efforts by the APCA. It didn't quite happen like that..

In 2007, BPAY (The bill payment platform opeartor) together with the major Australian banks tried to develop another platform called MAMBO (Me and My Bank Online) which would provide more account portability and faster payments. However, due to delays and increasing costs, several banks pulled out and the project was cancelled in 2011.

Then in 2012 the Reserve Bank of Australia demanded that they develop a real time payments platform by 2016, so they got together again and came up with the New Payments Platform, and although it will be a year late (expect late 2017), things are looking good.

One other takeout is that ANZ Bank's deputy CEO Graham Hodges said that MAMBO probably would have worked if it was built by a single bank rather than by a congress of institutions (source: ZDNet article). The NPP is being designed and built by SWIFT.

Posted by: Liron | April 5, 2017 at 01:47 AM

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