Limited Regulation of NonBank Payment IntermediariesProviders

1
Limited Regulation of Non-Bank Payment
Intermediaries/Providers

• Impact on Consumers and the Payments Industry
• Presented by Natalie Taylor, Counsel
• Board of Governors of the Federal Reserve System
• Global Payments Forum, September 16, 2004
• Prague

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Outline of Presentation

• Role of Federal Reserve Board as a regulator
• Objective of regulation generally
• -Consumer regulations / Focus on EFTA
  Regulation E
• Traditional service providers
• -Banks and other financial institutions /
  products
• Evolution of payments activities
• Third party service providers / products
• Issues (impact on industry / consumers)
• Alternatives to regulation

3
Role of the Federal Reserve as a Regulator

• Formulate public policies that improve the
  overall efficiency of the US payment system and
  reduce risk
• Promulgate regulations
• Enforce regulations

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Objective of Regulation

• Foster safety and soundness of the
  payment/financial system (assess risk)
• Promote competition (encourage/do not impose
  barriers to the development of new product
  innovations)
• Ensure adequate consumer protections
• Consumer regulations
• Goal Balance system efficiencies, consumer
  protections, and burden

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Traditional Service Providers

• Providers
• Historically, banks and other financial
  institutions
• Traditional EFT products
• Examples transfers via ACH, ATM cards
• Oversight
• Regulation (state and federal regulation-disclosur
  e, billing and error resolution, liability
  limits, issuance restrictions)
• Association and Network rules

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Third-party Service Providers

• Competition, new technology have encouraged
  non-traditional players to enter the payments
  market
• Third-party service providers/products
• 3 product examples
• 1) foreign remittances, 2) stored-value
  products, 3) check-to-ACH (electronic check
  conversion)
• No regulation v. limited regulation v. regulation
• Impact
• Alternatives to regulation