Introduction to the National Payments System
This book is designed to provide the reader with a foundation for understanding the NPS as a whole—its basic components, layers, payment instruments and channels, participants and how it is regulated and overseen. The concepts apply widely, though examples from specific countries are cited throughout. Many existing works focus on one part of the NPS or another or on specific payment instruments or channels. This book fills a gap in explaining how those parts fit together — what an NPS looks like and does.
Further, much work has been done on analysing large-value payments. These payments are the emphasis of the modern economy, but that is changing: electronic payments systems are developing quickly, and there is now an emphasis on financial inclusion in many countries. So this book will primarily deal with electronic payments, with a special focus on retail payments, a term that will be discussed in the next chapter.
Chapter 2 introduces the core building blocks of the payment landscape, distinguishing payments by three dimensions: the payment instrument, the store of value and the channel used. It also introduces the payment grid, which differentiates flows by the identity of payer and payee.
Chapter 3 addresses how the health and functioning of the NPS affects the national and international economy; and what this means for the main users of payment systems — consumers, businesses and governments — as well as for the providers.
Chapter 4 outlines the rules that shape the NPS, and Chapter 5 looks at how those rules are applied by regulators and overseers. Chapter 6 surveys the main participants in the payments system. In the final chapter, we look at emerging trends and what they mean for the future of payments.
Payments systems are evolving quickly — especially with the rapid increase in the number of electronic payment technologies and in the transaction volumes. Understanding the NPS as the framework within which individual payments systems operate and payment instruments are issued and acquired helps all participants to see “the forest for the trees.”
For payment regulators, this book helps to understand how their oversight powers can best be directed to the healthy development of the NPS so that it achieves national objectives. Financial inclusion is an objective of rising importance in many places and payment regulators need to consider how to make their payments systems more inclusive. An increasing number of other regulatory agencies, such as competition authorities, are also showing interest in the functioning of the NPS.
For payment providers, robust strategy to participate in and profit from the payment business will depend on having a keen understanding of how the NPS works as a whole: both the opportunities and competitors of tomorrow may come from different parts of the NPS. This book helps to provide a foundation for such a strategy.
For donors and investors wishing to promote payments system development, each funding intervention in a payments system will have an effect on the NPS as a whole. The social impact or financial value of an investment will ultimately depend on how the intervention fits into the evolving system. This book will help donors and investors to get an overview of the NPS ‘whole’ as more than a sum of its parts.
This book introduces a common foundation of knowledge, including a common vocabulary, for all three groups. On this foundation, further knowledge can be added over time. The NPS-Institute intends to support the ongoing learning journey through adding new modules to address new issues.