Eurosystem oversight of retail payment systems and retail

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Eurosystem oversight of retail

payment systems and retail

payment instruments

Stephanie Czák ECB

World Bank Global Payments Week

Lisbon, 23 October 2012

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Overview

1. Oversight of retail payment systems (RPS)

- Application of CPSS-IOSCO PFMI

- Eurosystem expectations for links

2. Oversight of retail payment instruments &

work of the European Forum on the security of

retail payments (SecuRe Pay)

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The objectives of payment systems

oversight

Maintaining systemic stability

Ensuring efficiency of payment systems

Maintaining public confidence in payment systems

Protecting the transmission channel for monetary policy

Objectives for retail payment systems and payment instruments

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1. OVERSIGHT OF RETAIL

PAYMENT SYSTEMS (RPS)

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Review of the RPS oversight standards

Motivation

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New classification criteria for RPS

• Number of countries involved in a RPS via direct participants from abroad or interoperability links

• Payments send via cross-border channels

A: Cross-border

dimension

• Market share in euro area (all payments)

• Market share in euro area (cross-border payments)

• Market share at national level

B: Degree of market

penetration

• Total daily average value C: Size

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Work in progress

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Review of the RPS oversight standards

• New Classification of retail payment systems

– ERPS (RPS of European importance)

– NSIRPS (Systemically important RPS at national

level)

– NPIRPS (Prominently important RPS at national

level)

– Other RPS

Cooperative oversight arrangements for

• ERPS and

• RPSs with cross-border relevance

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Work in progress

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Applicability of CPSS-IOSCO PFMI

per category of RPS

PRINCIPLES

ER

PS

NS

IR

PS

NP

IR

PS

Oth

er

Principle 1: Legal basis X X X X

Principle 2: Governance X X X X

Principle 3: Framework for the comprehensive management of risks X X X X

Principle 4: Credit risk X X

Principle 5: Collateral X X

Principle 7: Liquidity risk X X

Principle 8: Settlement finality X X X X

Principle 9: Money settlements X X X

Principle 13: Participant-default rules and procedures X X X X

Principle 15: General business risk X X

Principle 16: Custody and investment risks X X

Principle 17: Operational risk X X X X

Principle 18: Access and participation requirements X X X X

Principle 19: Tiered participation arrangements X X

Principle 21: Efficiency and effectiveness X X X X

Principle 22: Communication procedures and standards X X X

Principle 23: Disclosure of rules, key procedures, and market data X X X X

Total number of applied principles 17 17 11 8

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Work in progress

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Oversight expectations for links between RPS

Aspects and risks covered:

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General risk management

of links Legal risk

Operational risk

Financial risk Access criteria Efficiency

Governance Indirect and relayed links

Work in progress

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2. OVERSIGHT OF

PAYMENT INSTRUMENTS

& WORK OF EUROPEAN

FORUM ON THE SECURITY OF

RETAIL PAYMENTS

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Overview oversight expectations for

electronic payments instruments* Existing oversight expectations Access channel

Expectations in development

/under consideration Terminals Remote

contact technology

co

nta

ctl

ess

tech

no

logy (

e.g

. NF

C)

via internet

via

oth

er

co

mm

un

icati

on

netw

ork

s

(e.g

. mail, tel

ephon

e or

der

)

Paym

en

t in

stru

men

t

Credit transfer

Oversight framework for CT access by the account holder directly

and in person

access to the payment account involving

a third party provider

Direct debit

Oversight framework for

DD

Cards (physical, virtual)

Oversight framework for

cards

E-money (physical, virtual)

EMSSO, Harmonised

approach &standards for PI

Review ongoing

(adjustments for virtual e-

money) 11

* Paper based retail payment instruments are out of scope

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European Forum on the security of retail

payments (SecuRe Pay)

The Forum:

• a platform for cooperation between central bank

overseers and supervisors

• Observers: European Commission, Europol

Scope:

• electronic retail payment services, instruments

& payment service providers

Mandate of the Forum

• Facilitate common understanding among authorities

• Make recommendations

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SecuRe Pay Recommendations

for the security of internet payments

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General control and security environment

Work in progress

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Specific control and security measures for

internet payments

Initial customer

identification,

information

Strong customer authentication

Enrolment for & provision of strong authentication tools

Log-in attempts, session time-out,

validity of authentication

Transaction monitoring and authorisation

Protection of sensitive payment

data

Customer education and communication

Customer alerts and notifications,

setting of limits for internet payment

transactions 14

Work in progress

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SecuRe Pay work on

Access to Payment Accounts

Scope: Access by a party, which is neither the account owner

nor the account servicer

• Account information services

• Payment initiation services

Risks:

Unregulated services, liabilities not clarified

Risks due to additional actors involved

Risks due to additional communication sessions

Changing customer behaviour

Work in progress

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Questions?

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