The case for a national payment switch
Many nations previously established local debit card schemes and interbank networks with local data autonomy and control. Such a position de-risks dependency on global card networks. As a result of sanctions on Russia and the relative success of Russia’s domestic card scheme, other governments, are likely to consider developing their own domestic payment systems.
The knock-on effect of domestic payments data sovereignty has already become a key discussion topic, and many national authorities are likely to build and promote the use of their own local card schemes and inter-bank networks, mandate connectivity to domestic switches, and increase data sovereignty requirements.
The goal of the Central bank, payment-wise, is to create an enabling environment for digital payments, which will support the development of the host country into a digital economy. Additionally, the benefits of a national payment switch are:
- Providing a multifaceted inter-operator switching platform for various payment channels that will easily integrate local and international payment systems.
- Creating a common platform for key players to develop e-products that would extend the coverage of services beyond the traditional bank clientele;
- Providing an open system for businesses to enhance the utilization of electronic payments countrywide;
- Increasing versatility of payment options through the concept of ‘anywhere, anytime payment’.
- Instant payment and open banking rails
What benefits does a payment switch infrastructure bring?
The national payment infrastructure provides several benefits to the whole payment industry, namely, customers, merchants, service providers, and the government through:
- Lower transaction costs: As a direct intermediary between payment operators, the interoperable national payment switch infrastructure will bring the much-needed efficiency in dealing with domestic payments, which up to now required a non-domestic intermediary. The NPS will charge much lower routing fees to operators who will pass on the benefits to their customers.
- Lower operation costs: the national payment switch will be a central payment infrastructure allowing payment service providers to connect to the system through low-cost direct interfaces thus benefiting from economies of scale to reduce operation costs.
- More payment service providers: The NPS is providing a level playing field for bank and non-bank operators to compete and provide new types of services which will ultimately provide more options to the customers.
- More electronic payment options: When current retail payment options are principally limited to cards. The NPS infrastructure will promote the emergence of a new breed of payment service providers who will bring more customer-centric services and embed innovative payment options in services such as insurance, booking, etc.
- E-government services: the national payment switch comprise a payment gateway for government services to boost acceptance of electronic payments, regardless of whether these are on-site or online.