The Regulatory Payment Framework topic17
The Regulatory Payment Framework
An overview of the legal and regulatory landscape for payments.
Why Regulate Payments?
Primary Goal: Consumer Protection
Governments worldwide establish payment regulations primarily to protect consumers, who are the everyday users of payment services and systems. Regulations aim to create a safe, reliable, and transparent environment for financial transactions.
Fair Competition
Ensuring a level playing field for all payment service providers (PSPs), from established banks to new fintech companies.
Innovation
Encouraging the development of new, efficient, and secure payment solutions that benefit the entire economy.
Key Regulators Around the World
Europe (EU)
Primary Bodies: European Commission, Parliament, and Council.
Approach: Creates legislation (Directives, Regulations) to harmonize payment rules across member states, fostering a single market.
United Kingdom
Primary Bodies: HM Treasury, Bank of England, FCA, and the Payment Systems Regulator (PSR).
Approach: A multi-bodied system focusing on financial stability, conduct, and promoting competition and innovation specifically for payment systems.
China
Primary Bodies: People's Bank of China (PBOC) and others for specific services.
Approach: Separate regulators for different financial services (banking, securities, insurance) to oversee a rapidly growing internet finance sector.
Singapore
Primary Body: Monetary Authority of Singapore (MAS).
Approach: A single, powerful regulator that also actively drives innovation and fintech development, aiming for an interoperable e-payment society.
Australia
Primary Body: Reserve Bank of Australia.
Approach: Focuses on re-engineering the payment system for real-time capabilities through initiatives like the New Payments Platform (NPP).
United States
Approach: Focuses on consumer protection for cross-border payments through laws like the Dodd-Frank Act.
Key Regulation: Regulation E requires transparency on fees, exchange rates, and delivery timelines for international remittances.
Landmark European Legislation
Payment Services Directives (PSD & PSD2)
A series of EU directives that revolutionized the payments market by increasing competition, improving consumer protection, and fostering innovation.
Opened the Market
Introduced the 'Payment Institution' (PI) license, allowing non-banks to offer payment services and compete with traditional banks.
Open Banking (via PSD2)
Mandated that banks provide access to customer account data (with consent) to Third-Party Providers (TPPs) via APIs, leading to innovative new financial services.
Enhanced Security
Introduced Strong Customer Authentication (SCA) to make electronic payments more secure, requiring two-factor authentication for many online transactions.
Increased Transparency
Established common rules for terms, conditions, and information requirements, ensuring consumers are well-informed.
Single Euro Payments Area (SEPA)
A major EU integration project designed to make cross-border electronic payments in euros as easy, cheap, and secure as domestic payments.
Standardization
Created common standards and schemes (like SEPA Credit Transfer and SEPA Direct Debit) using the ISO 20022 XML format.
Harmonization
Replaced national euro payment schemes with a single, pan-European system, simplifying processes for businesses and consumers.
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