MOBILE PAYMENTS: FINANCIAL MARKETS PERSPECTIVES
Senior Policy Analyst, Financial Markets Unit
OECD Committee on Financial Markets Roundtable on Competition in Mobile Payment Services
Iota Kaousar Nassr
Broader policy objectives A horizontal OECD approach
Complementary perspectives, depending on mandate of authorities - managing potential trade-offs
Coordination at national (avoid fragmentation) and international level (avoid regulatory arbitrage)
Safeguard financial stability
Ensure market integrity
Protect financial consumers
Data protection
Promote financial inclusion
Promote welfare-enhancing innovation and economic growth
Ensure fair market competition
Broader policy objectives Safeguarding financial stability
Regulatory safeguards in place (incl. AML/CFT)
Compliance and oversight
Including for new entrants (e.g. UK access to fast payments infrastructure for new players subject to regulation and supervision)
Safeguard operational resilience of ecosystem involved in mobile payments
Cyber resilience
Back-up systems and business continuity
Third-party technology service providers (e.g. cloud services, SaaS)
Concentration in the number of vendors providing critical services
Risk of dependencies – possible vector of systemic risk
Similar considerations in AI-related services (cloud, models, data)
Still, efficiencies and scalability of payment innovation built upon – and thanks to - the services provided by such 3rd party providers
Emergence of oversight frameworks for tech firms deemed critical ICT 3rd party service providers for Digital Finance (e.g. DORA in EU)
Broader policy objectives Promoting
financial inclusion
Example of M-PESA Mobile Network Operator-led system (Kenya)
Leapfrogging in EMDEs
But, still lagging behind in API development – such systems become the ‘legacy systems’
Critical role of interoperability
Still, market power-related issues may be observed (e.g. participating agent network)
Synergies enabling additional financial services/products (e.g. credit provision through M-Shwari)
Subject to financial regulation (same activity, same risks, same rules)
M-Shwari subject to full banking regulations, including oversight by the Kenya Deposit Insurance Corporation (KDIC)
Leveraging additional financial technology for innovation
Combining mobile payment information and telecommunication data for credit-scoring decisions
Has marked a significant advancement in serving low-income unbanked or underserved customers (incl. female)
Broader policy objectives Protecting financial consumers
Mitigate financial consumer risks (G20/OECD High-Level Principles on Financial Consumer Protection)
e.g. Fraud and scams; discriminatory practices (such as price optimisation practices, price differentials or outright exclusion)
Data centrality: Flow of value = Flow of data
BigTech and platforms hold extraordinary amount of data beyond payments + analytical capacity
Transparency
Data privacy (OECD Guidelines on the protection of privacy and transborder flows of personal data)
Purpose limitation, Privacy by design and by default, Accountability, Data security
Data ownership (open banking/finance) and consent
Expand consumer choice, avoid risk of lock-in
Dispute management systems where P2P payments
Source: (OECD, 2022), G20/OECD High-Level Principles on Financial Consumer Protection, (OECD, 2023), Open finance policy considerations.
COMPETITION OPPORTUNITIES IN MOBILE PAYMENTS
OECD work on Data-sharing frameworks
OECD Survey on Open Finance “Shifting from Open Banking to Open Finance” (2023)
Workshop “Data Portability in Open Banking: Privacy and Other Cross-cutting Issues”
OECD report on “Open Finance: Policy Considerations”
Payments data at the core of data sharing
Payment account data of retail and business consumers (w. consent) (e.g. EU)
(i) Third parties allow the customer to see all data in one place and/or provide personalised recommendations; and
(ii) Initiate payments directly from the customer account.
Depending on the contractual arrangement (e.g. Japan)
Depending on the firm (e.g. US)
Data related to sustainability characteristics of the product Data held by non-financial firms (e. g. social media, e-commerce)
Derived data (data enhanced by the provider but provided to the…
Data related to product risk characteristics
Credit bureau data Official sector data (e. g. tax authorities, social security , land…
Personal customer data (e. g. savings, credit , investment ) Non-payment / transaction data of business customers (e. g.
Payment account data of retail customers Payment account data of business customers Non-payment / transaction data of retail customers (e. g. savings,
Objectives and benefits of data sharing frameworks Balancing innovation with safety & soundness
Product diversity
Enhanced personalisation
Efficiencies and costs
Improve financial products and services
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Foster customer empowerment
Financial management
Product switching
Access for previously underserved clients
Different products (existing products in new ways)
New products
Promote innovation
Open Finance
Facilitate customers’ choices about their data
e.g. dashboards
Growth of TPPs (e.g. FinTechs)
Emergence of new participants (e.g. PISPs*, aggregators)
Encourage competition
Part of wider data strategy
De-monopolisation of data
Data-related policies (e.g. AI)
Caveat: Safeguards in place to protect consumers, financial services providers, and markets from risks
Impact of data sharing frameworks thus far
Data sharing frameworks in place are reported to have been producing positive impacts on customers and financial services, fostering innovation, increasing competition, lowering costs, and delivering better customer experiences
Importance for FinTech start-up creation and diversity
Potential to promote real economic growth
Limited evidence and too early to assess in many cases, depending on implementation
Reported impact of Open Finance-like frameworks and arrangements Impact of data sharing frameworks on FinTechs in terms of growth and diversity
Importance of portable ID
• Currently: Implementation of Open Finance frameworks predicated on the data holder (primarily banks) identifying and verifying the individual requesting a transaction before the data is released
• Existence of portable IDs could alleviate processes related to secure customer authentication in payment initiation
Portable digital ID could act as a catalyst for cross-sectoral and crosscountry data sharing to be operational
• Private sector has strong appetite to pivot but important for official sector-led ID Does the data sharing initiative include a portable digital identity that could be used across financial/ non-financial sectors?
Policy considerations
Build trust
• Safeguarding financial consumers
• Introducing data privacy safeguards
• Enhancing data security
• Establishing clear liability rules
Build incentives
Tech and infrastructure necessary but not sufficient conditions
• Promoting reciprocal access to data between all parties
• Consider allowing economic compensation, with principle of proportionality in mind (economic rationale)
• Business and economic rationale (e.g. merchant acceptance)
Importance of compliance with regulatory frameworks (techn neutral, risk-based financial regulation)
Build interoperability
• Legal / regulatory
• Technical
• Business
• Across different sectors and across different countries
• Guide and support industry-led efforts on interoperability of technical interfaces (e.g. APIs)
• Invest in advancing ongoing or planned efforts for digital identities delivered by the official sector
Coordination between authorities to avoid risk of fragmentation of oversight
Looking ahead Emerging trends
Alternative payment apps (and rails)
and policy implications
• DLT-based finance: ‘always on’ 24/7 models, decentralisation
• Tokenisation of assets (programmability, atomic settlement)
• Stablecoins (alternative payment rails)
• Importance of cash availability
Increasing velocity and complexity of tech innovation
Complex risk environment
• Ever-growing digitalisation of financial markets
• Speed of innovation, pervasiveness (e.g. Artificial Intelligence, role of open source)
• Interplay between different digital finance innovations (e.g. AI and Open Banking)
• Ensuring regulatory and supervisory frameworks remain fit-for-purpose
• Coordination (supervision and enforcement)
• Increased surface for cyber attacks, sophistication of fraud, data
• Promote and support innovation while maintaining robust safeguards against systemic disruptions, consumer harm
• Continuous monitoring and risk assessment, adaptive oversight tools
• Upskilling, investment
• Multidisciplinary approach, public-private collaboration
https://www.oecd.org/en/topics/subissues/digital-finance.html