De Nederlandsche Bank Eurosysteem Oversight on Retail Payments Paul Osse Conference Financial Sector of Macedonia on Payments and Securities Settlement Systems Ohrid 25 June 2008 De Nederlandsche Bank

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

De Nederlandsche Bank Eurosysteem Objective presentation Not to 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

De Nederlandsche Bank Eurosysteem PayeePayer * Debtor’s Commercial Bank * Creditors Commercial Bank National Central Bank * Automatic Clearing Houses * Owner Interbank Payment Products Legend:. payment order. order flow info. owner relation. payment products. goods/services. owner payment * product relation Objects of oversight System of retail payments in NL Electronic Money Institutions

De Nederlandsche Bank Eurosysteem Oversight on the payment system: the role model Object of oversight: The whole payment chain Payment instrument Channel/ medium Transaction Processing Clearing Settlement

De Nederlandsche Bank Eurosysteem Objects (general) Retail Payment Systems Payment Instruments

De Nederlandsche Bank Eurosysteem 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.

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

De Nederlandsche Bank Eurosysteem 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)

De Nederlandsche Bank Eurosysteem New technologies and retail payments

De Nederlandsche Bank Eurosysteem Influence of developments (1) Trends retail payments: European Consolidation  TARGET  SEPA Specialisation/Unbundling  Multiple operators/owners: card schemes, transaction networks, etc

De Nederlandsche Bank Eurosysteem Influence of developments (2) Market developments  New technologies  contactless, mobile payments  internet  biometrics  New providers of payment services  telecom providers  public transfer  etc etc

De Nederlandsche Bank Eurosysteem Non banks in the payment system Outcome recent survey: >125 non banks Non banks are active in the whole payment chain

De Nederlandsche Bank Eurosysteem Oversight on the payment system: the role model General approach oversight: Licensing or moral suasion Assessments of systems and products against standards Regular oversight

De Nederlandsche Bank Eurosysteem Oversight on the payment system: 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,...)

De Nederlandsche Bank Eurosysteem Oversight on the payment system: 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

De Nederlandsche Bank Eurosysteem PayeePayer National Central Bank Automatic Clearing Houses * Owner Interbank Payment Products Legend:. payment order. order flow info. owner relation. payment products. goods/services. owner payment * product relation Overview supervision on the non cash payments * Creditors Commercial Bank AFM DNB Prudential Supervision DNB Oversight * Debtor’s Commercial Bank * Electronic Money Institutions

De Nederlandsche Bank Eurosysteem 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

De Nederlandsche Bank Eurosysteem Oversight on the payment system: the role model To solve these problems our oversight approach is changed to: A role based approach

De Nederlandsche Bank Eurosysteem Legal Owner Issuer Clearing Institution Acquirer Issuing processor Clearing processor Acquiring processor Settlement processor Settlement Institution Merchant/ acceptant Consumer Network processor Acceptant Payment Service Provider Scheme oriented organisation retail payments Service Providor Retailer Acquirer

De Nederlandsche Bank Eurosysteem Oversight on the payment system: the role model 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 Possible roles in the payment scheme

De Nederlandsche Bank Eurosysteem Oversight on the payment system: 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

De Nederlandsche Bank Eurosysteem QUESTIONS? QUESTIONS?

De Nederlandsche Bank Eurosysteem Time’s up……… Thank you for your attention P.W. Osse RE RA CISA De Nederlandsche Bank N.V