Guidelines for Oversight of Non- Banks Electronic Retail Payment Systems

By Kennedy J. Komba
August 2010
The rapid growth and proliferation of non-banks electronic retail payment systems in MEFMI member states has created concerns for the central bank on how to effectively regulate the industry. Electronic retail payment systems have gained acceptance in most countries in the region for their role of financial inclusion, cost effective payment services and convenience. Their benefits transcend from the individual customers to the wider spectrum of the economy in countries where more than 60% of the population do not have bank accounts. Central banks have not been able to fully implement risk management approach to oversight of the electronic retail schemes due to regulatory challenges and human capacity issues, as a result some central banks have not been able to grant licences to some innovative retail schemes in their markets. This has generally affected optimum implementation of such electronic schemes which are beneficial to the economy by inclusion of unbanked population to the financial services stream. Effective oversight of the electronic retail payment systems will enhance implementation of such systems in the region, improve their risk management and create an efficient competitive environment.
The paper proposes a generic guideline for oversight of electronic retail payment systems. The framework is based on risk management approach using some indicators that can be built in to assist oversight of the electronic retail systems in MEFMI region.
Keywords: Non-banks electronic retail payment systems, oversight, risk management, indicators.