1. Lessons Learned from Payments System Interoperability
ITU Workshop on “Digital Financial Services and Financial Inclusion”
(Geneva, Switzerland, 4 December 2014)
Lessons Learned from Payments System Interoperability
Carol Coye Benson
Managing Partner Glenbrook Partners

2. Check, ACH, and “open loop” card systems all work this way
Payments Systems
Payments systems around the world are “bank transfer systems” – consumers and businesses use them through relationships with banks
Check, ACH, and “open loop” card systems all work this way
End User
Bank
Transfer System
In some countries, regulators are expanding direct participation to non-banks

3. Payments Systems
Bank transfer systems have “built-in” interoperability, and can reach all banked customers in the country
The “hub” is often an industry-owned consortium, with a cost-recovery business model for participating banks
In some countries, regulators are expanding direct participation in these systems to non-bank payments institutions
In some countries, regulators are expanding direct participation to non-banks
Banks may have profitable businesses that are built on top of the “utility” payments structure

4. Payments Systems Functions
RULES Law and Operating Rules
BRAND
Common terms for payer and payee
PROCESSING
Switching and settlement
Balance between law and private operating rules: the stronger the law or regulation, the less important the operating rules are
Transaction management
Liability
Interchange
etc.

5. Payments System Provider
Payments Systems
Closed-loop systems exist, but are much less common, and struggle to reach ubiquity
Check, ACH, and “open loop” card systems all work this way
End User
Payments System Provider
End User
Rewards or other incentives necessary to have end-users participate in a system with limited ubiquity

6. Network Interoperability
Possible, but challenging
End User
Payments System Provider
Not a technical problem….
Which network rules apply?
Are the networks competitive?
End User
Bank
Transfer System
ATM networks are an example
Are end-parties confused?

7. Interoperability and Financial Inclusion
The unbanked use cash, which is interoperable: “accepted everywhere”
To move away from cash in a manner useful to the unbanked, we need to at least meet the “cash threshold”:
Ubiquity
Simplicity
Low cost
Cash is perceived as low cost by end users

8. Conclusions and Recommendations
There are effective models for interoperability among banks that can apply to mobile money systems
Cash is the standard against which the unbanked will measure the usefulness of mobile money