The payments system is built on networks, which means that a certain amount of coordination and collaboration is essential for it to function and develop over time. The challenge is to encourage stakeholder collaboration that supports innovation and competition while discouraging collective or individual behaviours that are detrimental to payments system users.
No one at APCA wrote this paragraph – it comes from the final report of the Canadian Government’s Payments System Review. The thing is, we could have written it. It expresses APCA”s philosophy as the payment system self-regulatory body.
The networked nature of payments gives APCA its reason for being. We help competitors coordinate to deliver the payments network the economy needs as it evolves. The faster the payments landscape changes, the harder this becomes.
The paragraph quoted above wraps up three difficult and shifting balances that must be struck if APCA is to do its job well:
- Promoting aggressive competition amongst payment providers and schemes versus promoting industry-wide coordination when it is needed;
- Encouraging innovation and evolution versus ensuring safety, reliability and stability;
- Maintaining the engagement of big, mainstream players in system evolution versus recognising the interests and contribution of newer, smaller and alternative players.
There are no right answers here, and each country is likely to strike the detailed balances differently. South Africa has passed legislation requiring payment participants AND schemes to be licensed by the local payments industry association. The Canadians are proposing a separation of powers between an industry body that owns and operates basic payments infrastructure, and another, new industry body that sets industry policy and strategy. Both would be subject to a new government oversight body. The United Kingdom has established self-regulatory bodies, such as the UK Payments Council, with informal public oversight, and the United States has no general governance framework for payments issues at all.
Here in Australia, we have already done a lot of work on overall system governance.
APCA has existed as a general industry coordinating body since 1992, and in 1998 the Payments System Board was established within the Reserve Bank with extensive powers to promote public policy outcomes in payments. But the world has changed a lot since 1998. The biggest change has been that payment networks and schemes have evolved from largely domestic utility services into increasingly global, competing and commercialised organisations.
APCA has been working on reform of its own membership and decision-making for some time. We have a conviction that as the payments industry self-regulator, we can serve the industry, and the broader community, better by being more inclusive, and by more transparently striking the three balances mentioned above.
In payment system governance, the devil is absolutely in the detail. The Reserve Bank and the industry need to work together to come up with a model that will work, not just for today’s known challenges, but for the unknown challenges of future years. APCA has put forward its proposal, but many others will have a view. Most important, the Payments System Board needs to express its opinion. This next opportunity for this is the conclusions of their Strategic Review of Innovation, due in June 2012. We look forward to this important milestone.
