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Governance Down Under
When I was a product manager responsible for faster ACH, I had a ringside seat to the lengthy maneuvering required to garner sufficient votes to mandate same-day ACH after the first attempt failed. We can anticipate similar maneuvering as we continue making fundamental improvements to payments, including the various initiatives under way around faster payments.
All of this harkens back to a compelling conference presentation that treasury representatives of a very large U.S. retailer gave several years ago. That presentation focused on the potential benefits of adopting a comprehensive, self-regulating governance model like Australia's. The Australian Payments Clearing Association (APCA) offers key payment stakeholders a seat at the table, thus balancing competing interests among parties in the payment chain.
I agree that the APCA could offer a template for any governance model being contemplated in the United States.
The APCA, to paraphrase, characterizes itself as being responsible for managing and developing regulations, procedures, policies, and standards governing payments clearing and settlement. Standing with and behind them is the authority conferred by the Reserve Bank of Australia (RBA), that country's central bank.
The 100-plus APCA members include a broad cross section of financial institutions, major retailers, and payments providers. The APCA board comprises an independent chair, the chief executive officer, two additional independent directors, eight nonvoting appointed or elected directors, and an RBA representative.
The expected completion later this year of a new payments system will be one of the APCA's more noteworthy achievements. The New Payments Platform, or NPP, will offer a low-value, faster payments service. The APCA partnered with 12 financial institutions to fund the NPP's development costs.
The APCA is divided among the following operational areas:
- Direct debit/credit—is equivalent to ACH in the United States
- Wire transfers
- Cash—sets rules for the exchange and distribution of cash among participating financial institutions
- Card issuers/acquirers—sponsors a forum for collaboration
- COIN (Community of Interest Network)—offers a shared infrastructure supporting connectivity for payments such as checks, direct debit and credit, cards, bill pay, and others
Here in the United States, the Federal Reserve has already created a couple of agencies with some similar features: a task force on faster payments and another task force focused more broadly on secure payments for legacy and emerging payments. Both task forces include broad representation from financial institutions, payment providers, businesses, consumer groups, regulators, law enforcement, and others. Perhaps the biggest difference between the APCA and these two work groups is the ad-hoc, limited duration of the Fed groups and their mandate, which is limited to an advisory role. But there are some other activities that the APCA handles that here in the United States are handled by various disparate entities, a situation that hampers coordinated action.
What are your views on what, if anything, we should do to enhance payments governance in the United States?
By Steven Cordray, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed