9. Access to Payment Systems Flashcards
(15 cards)
What is direct access to a payment system?
When a payment service provider (PSP) is a direct participant and connects to the payment system without intermediaries, usually holding a settlement account with the central bank.
What is indirect access to a payment system?
When a PSP accesses the payment system through a direct participant (sponsor bank) who processes and settles payments on their behalf.
What is a sponsor bank in the context of payment systems?
A bank that offers indirect access to a payment system by processing transactions and settling funds on behalf of another PSP.
Name three types of entities that can be payment system participants.
Banks, non-bank PSPs (e.g., e-money institutions), and credit unions.
Who are service users in a payment system?
Customers such as businesses, merchants, or individuals who use payment services provided by PSPs.
What role do scheme operators play in payment systems?
They manage and govern the operation of the payment system, including setting rules, technical standards, and access conditions.
Give two examples of payment scheme operators.
Pay.UK and Mastercard.
What role do central banks play in payment systems?
They provide settlement infrastructure, oversee systemic risk, and may act as regulators of access and operation.
What are two key access criteria for joining a payment system?
Regulatory authorisation as a PSP and the ability to meet operational and risk management requirements.
Why might a non-bank PSP choose indirect access?
They may lack the scale, capital, or technical infrastructure needed for direct access.
What is one risk of indirect access for the non-bank PSP?
They are dependent on the sponsor bank’s performance and subject to its terms, including fees and operational limits.
What is the importance of widening access to payment systems?
It promotes competition, drives innovation, and reduces reliance on a small number of major banks.
How does Open Banking impact access to payment systems?
It allows third-party providers to access payment initiation and account information services via APIs under regulated conditions.
What is the role of contractual obligations in access models?
They define the rights, responsibilities, and service levels between sponsor and indirect participant.
What is one regulatory goal concerning access to payment systems?
To ensure fair, transparent, and non-discriminatory access to encourage innovation and financial inclusion.
