In the banking industry’s quest towards open banking, standardisation has now become the name of the game towards global applicability. There is a consistent push and pull between whether these standards should come from regulators or industry players. On one hand, regulators can future-proof standards in that they could design the standards based on principles that ensure safety in the ecosystem. On the other hand, industry players may be better suited to producing standards or platforms that could better encourage innovation and growth of the industry as they are often instrumental in making it happen.

Many of the standards listed below only apply to one region or another, but as the interchange fee regulation in the EU being implemented in Australia shows, there is something to be said about the ripple effect of regulations, particularly when regulators attempt to implement what works in other countries. The following is a list of initiatives, regulations and standards that have been listed in the World Payments Report 2018, by Capgemini and BNP Paribas.

1. AML Regulations

Set up by America’s FINRA, (FINRA is a not-for-profit organization authorised by Congress to oversee that the broker-dealer industry operates fairly) the purpose of the AML rules are to help detect and report suspicious activity including the predicate offenses to money laundering and terrorist financing, such as securities fraud and market manipulation.

2. Bank Payment Obligation

Bank Payment Obligation is a new payment method developed based on data matching, for purposes of risk mitigation and financing payment obligations. It is considered a class of settlement solution in the international supply chain finance.

BPO is an irrevocable undertaking given by an obligator bank to a recipient bank to pay at a specific date and amount, under successful data matching conditions based on rules by the International Chamber of Commerce.

3. Intraday Liquidity Standards

Perhaps one of the more contentious introductions as many banks seem to struggle with compliance, the norms and regulations were introduced following the 2008 financial crisis. These standards began when the Basel Committee on Banking Supervision (BCBS) published a set of monitoring tools that set out for banks to assemble the data to enable sufficient supervision.

4. P2P Lending Regulations

The peer-to-peer lending industry is now regulated by the Financial Conduct Authority (FCA) in the UK, with a regulatory framework designed for additional consumer protection, promote effective competition, among others. There is a strong emphasis on transparency and availability of information in a bid for consumer protection.

5. Liquidity Coverage Ratio (LCR) under Basel III

The LCR are highly liquid assets held by financial institutions as a safeguard for meeting short-term obligations. The ratio serves as a stress test that should anticipate any market-wide shocks. The LCR aims to assure that financial institutions have necessary assets to ride out any short-term liquidity disruptions. The LCR was an important part of the aforementioned Basel Accord.

6. FCA’s Credit Card Rules

The FCA published a final policy statement last year on brand new rules for the credit card market, which they estimate would save consumers between £310 million and £1.3 billion a year in lower interest charges. The goal is to provide more protection for credit card customers in persistent debt or at risk of financial difficulties.

7. Distributed Ledger Regulations

The World Payments Report puts distributed ledger regulations, or blockchain under one label to identify the varying blockchain regulations that have been popping up across the world as blockchain gains traction beyond just cryptocurrencies. As is with cryptocurrency, it seems like different regulators are eschewing global trends to tackle blockchain in their own unique ways, and not necessarily by equivalent regulatory bodies either.

8. Electronic Identification and trusted Services

Also known as eIDAS, the electronic identification and trusted services is an EU set of regulatory standards for electronic identification and trust services for digital transactions in the European Single market, and repeals directive 1999/93/EC from 13 December 1999. eIDAS regulates electronic signatures, electronic transactions, involved bodies, and their embedding processes in order to grant a safer way for users to conduct business online—inclusive of electronic funds transfer or transactions with public services.

9. Payment Card Industry Data Security Standard

The PCI Security Standards Council (PCI SSC) is an open global forum, which developed the information security standard for organizations that handle branded credit cards from the major card scheme. The rapid development of payment-acceptance applications using mobile technologies has led PCI SSC to consider its approach to provide guidance to secure all implementations.

10. Cybersecurity

The FCA declared cybersecurity as a regulatory priority in 2016, and later issued a guide, in the form of a fact sheet titled “Good cyber security – the foundation” in which the regulator set out to protect sensitive information held by regulated firms. These include a call to understand what information is held, why, and who has access to the most sensitive data, and protection, backups, regular capability testing for disaster recovery systems, and prompt application of updates and patches to systems.

11. OECD’s Base Erosion and Profit Shifting Plan

With involvement from 116 countries, the OECD’s base erosion and profit shifting planThe OECD G20 Base Erosion and Profit Shifting Project (or BEPS Project) is a project by OECD to combat tax avoidance by multinational corporations in the context of financial crisis and tax affairs via offshore leaks.

12. Bank Charters for Fintech Firms

In 2018, the Office of the Comptroller of the Currency (OCC) in USA announced that it would accept proposals from fintech firms to charter special purpose national banks (SPNBs), which came following a white paper proposing similar charters under Presiden Obama’s Comptroller, Thomas Curry to answer the trend of ballooning startup numbers. The OCC expects any charter proposal to have a comprehensive business plan covering at a minimum three years.

13. Cash-use Reduction Initiatives

The initiative by the European Commission in 2016 is an action plan to embolden other efforts in place to fight against the financing of terrorism. One element of said action plan called payments in cash as widely used in the financing of terrorist activities due to its anonymity, and considers applying upper limits to cash payments as a potential solution.

14. Australian Payment Plan

The Australian Payments Council opines that having access to convenient and secure digital services is important, and designed the payments plan to help provide a strategic direction for the industry to work collaboratively on. Part of the Australian Payment Plan also aims to address some gaps not covered by existing initiatives, like understanding opportunities presented by digital identity management, managing Australia’s payment mix, and enabling the next wave of digital innovation.

15. Virtual Account Management Services for SEPA

The Single Euro Payments Area (SEPA) proposed by the EU has a goal of enabling more efficient cash management infrastructures for the euro. Despite reticence from certain players, it’s been said that one of the areas of potential is the virtual account management (VAM), which should deliver on SEPA’s goal of reducing up to 9 million bank accounts, by facilitating greater client control over payments and improving how transaction data is brought together and utilised under one bank account.

16. ISO 2022

ISO 20022, a name familiar to open banking advocates, is a methodology that financial institutions can follow when creating financial messaging standards, and is not controlled by or the sole purview of any single interest. Many open banking advocates recognise ISO 20022 as a standard. It is a metadata repository containing descriptions of messages, business processes and maintenance processes for repository content.

17. Payment Account Directive

Implemented in 2014 by the European Union, the Payment Accounts Directive aims to improve the transparency and comparability of fee information about payment accounts, help people switch payment accounts, and ensure every EU resident has access to a basic bank account. It would also in part, introduce a requirement to standardise terms and definitions to describe key services linked to payment accounts, and subject to a fee. 

18. Cross-Border Low-Value Payments Processing

Another EU initiative is the European Commission’s proposed a new regulation that requires better disclosure of credit card foreign exchange fees and that charges on intra-EU cross-border euro and domestic non-euro payments be equalised. It imposed price controls on payments to address any perceived problems, notwithstanding attendant market distortions and shortages, while the Payment Services Directive 2 mandated banks provide payments for free.

19. Canada’s Retail Payments Oversight Framework

To account for an increasingly outdated payments oversight system falling behind fintech innovations, Canada will apply a framework to payment services providers performing at least one of the identified core functions in electronic funds transfers. he Framework would cover a wide-range of transactions, including credit card transactions, online payments, debit transactions, peer-to-peer money transfers, pre-authorised
payments, and pay deposits.

20. Regulatory Framework for Fintechs

In July last year, The Office of the Comptroller of the Currency (OCC) announced it will begin accepting applications for national bank charters from nondepository financial technology (fintech) companies engaged in the business of banking. Since there is no singular regulatory framework for fintechs in USA, fintechs are generally subject to State laws which may vary across different state lines. A bank charter could serve to unify regulations for fintechs.

21. Instant Payments

With the EU working on SEPA, advocating for instant payments falls under similar goals. The European Central Bank is encouraging payment service providers to make instant payment solutions for the euro available to customers as of November 2017, though efforts are currently ongoing. The programme is run with the belief that instantaneous and around-the-clock instant payments services should be available in every European country.

22. eInvoicing and eVat

In 2013, the EU implemented a directive that hoped to create a level playing field between paper and electronic invoicing. However, the EU now wants to facilitate digital transformation, and eInvoicing is making a lot of ground throughout the European Union. With 2018 set as a key date, the EU set up Directive 2014/55/UE, a a standard that aims to facilitate cross-border commercial relations with the creation of interoperable common standards. Systems such as electronic VAT returns or e-accounting through SAF-T have also been on the rise among European businesses.

23. Electronic Bank Account Management

Also known as eBam, these refer to softwares that provide automation of activities between banks and corporate customers,. The term was defined by SWIFT and is considered part of the ISO 20022 Standard for Financial Services Messaging. Today’s financial institutions are evolving towards an extensive eBAM solution where electronic and automated workflows also used for the external communication with banks.

24. Interchange Fees

In the European Union, interchange fees are applied to 0.3% of the transaction for credit cards and to 0.2% for debit cards. Applicable since 2015, the goal is to simplify fee structures for card-based payments, as well as stepping towards the creation of an EU payments market. The revision was initially applied in EU, but has begun to appear in other markets like Australia. 

25. PSD2

PSD2, an EU directive, should enable a bank’s customers to use third-party providers to manage their finances, which requires banks to provide third-party providers access to customers’ accounts. This is where open banking API platforms come in, usually set up by key industry players.  Thepurpose is to increase pan-European competition and participation in the payments industry even among non-banks, while also providing a level playing field for them by harmonising customer protections, and right and obligations of payment providers and users.

26. Global Payments Innovation (GPI) by SWIFT

With a goal of bringing transparency to application providers and their customers, SWIFT launched the Approved GPI Label Programme, where providers can use them to demonstrate that their applications are GPI-ready. GPI here is an effort towards delivering much-needed improvement on international transactions. The goal is to improve transaction speeds, create predictable settlement times and clear statuses, provide additional information on remittances, and transparency on exchange rates applied throughout the payment cycle.