Barriers to Access to Payment Systems in Sending Countries and Proposed Solutions

This paper analyzes the difficulties for nonbank remittance service providers (RSPs) in their indirect access to the domestic payment system infrastructure. It presents the background and the current situation, giving examples from a few key sending markets. The paper also outlines the factors underlying the current situation, and presents several potential pragmatic solutions as a basis for further discussion along with implementable proposed action plans. Key solutions suggested include:

• Create country-level task forces with the objective of finding and implementing a workable set of solutions for all parties involved;
• Regulatory bodies need to provide detailed guidance on how existing laws and regulations are to be interpreted. This will aid banks in managing/enforcing risk in this area;
• Harmonize anti-money laundering/combating financing of terrorism (AML/CFT) regulations with regard to remittances and set up some commonly understood global standards in a more prescriptive manner. This would help mitigate the problems of consistency and coordination between regulators in different countries;
• Discussions with many banks resulted in an understanding that their level of understanding about the nonbank RSP business model is not as complete as it could be. A possible solution for this would be the establishment of specialized money transfer operator (MTO)-focused banks.