2.2. COMPONENTS OF A REGIONAL PAYMENT SCHEME FRAMEWORK

This section will aim to show, by way of example, how learnings from the World Bank Guidelines as well as other regional developments were used in the creation of the SADC Low Value Credit Transfers Cleared on an Immediate Basis Payment Scheme (TCIB).

This is best explained by breaking down a payment scheme into the various components that were identified when developing the SADC TCIB Payment Scheme.

The diagram below depicts the various layers of a typical regional payment scheme that have been identified and to a degree, also the level of importance attached to each area.

Other economic regions are welcome to consider these components and amplify them should there be other components that they have come across in their developments.

Diagram 11

TABLE OF CONTENTS

2.2.1 PAYMENT SCHEME SUPERVISION AND REGULATION FRAMEWORK
2.2.2 PAYMENT SCHEME GOVERNING BODY (PSMB)
2.2.3 PAYMENT SCHEME OWNERSHIP BODY
2.2.4 PAYMENT SCHEME OPERATING MODEL, RULES AND STANDARDS
2.2.5 PAYMENT SCHEME OPERATOR(S)
2.2.6 PAYMENT SERVICE PROVIDERS (USERS)
2.2.7 PAYMENT PLATFORM SERVICE PROVIDER(S)
2.2.8 SOFTWARE/HARDWARE AND NETWORK PLATFORMS
2.2.9 SOFTWARE STACK

 

2.2.1 PAYMENT SCHEME SUPERVISION AND REGULATION FRAMEWORK

The diagram below is a high level representation of the supervision and regulatory framework that prevails in SADC and will be explained as follows;

  • PSOC – SADC Payment Systems Oversight Committee. Comprises of representatives from all central banks from SADC countries that are live on the SADC-RTGS. One of their duties is the authorisation of regional FI’s in terms of the criteria laid down for such organizations.
  • Central banks – responsible for the regulation of their institutions, both banks and non-banks authorised to make cross-border transfers.
  • Participants – adhere to the regulatory requirements of their central banks in terms of AML, Sanctions screening, KYC etc.

Diagram 12

2.2.2 PAYMENT SCHEME GOVERNING BODY (PSMB)

This is a self-governing body whose main function is the management of the payment processing between countries in SADC, i.e. ensure adherence to the operating model, rules and standards etc., whereas the central banks manage the regulation etc. within each of their respective countries.

Further detail concerning the PSMB can be found in sub-section 7.8.5 of the SADC Beige Book and access to the book can be obtained from the SADC Banking Association.

2.2.3 PAYMENT SCHEME OWNERSHIP BODY

A payment scheme ownership body is an entity consisting primarily of the participants in the payment scheme. An entity which can be likened to a super user group.

The Terms of reference (constitution) of the SADC TCIB Participant Association is outlined in Annexure A

This organization aims to ensure the on-going success of the payment scheme.

2.2.4 PAYMENT SCHEME OPERATING MODEL, RULES AND STANDARDS

2.2.4.1 OPERATING MODEL

The diagram below provides a high level view of the SADC Operating model for the TCIB Payment Scheme. All other aspects of the payment scheme are based on the agreed operating model.

The diagram indicates that the transfers are cleared through a Regional Clearing and Settlement Operator for efficiency and cost effective reasons.

Banks and non-banks connect direct to the RCSO or via 3rd parties to exchange payments.

Settlement is through the SADC RTGS and for non-SADC RTGS currencies settlement is via correspondent banking arrangements.

ISO standards are adopted for processing.

Participants are allowed to maintain specific arrangements with counterparties as these are out of scope.

Diagram 13

The full operating model is housed in the sub-section 7.2.8 of the SADC Beige Book.

 

2.2.4.2 PAYMENT SCHEME RULES

The SADC rule book for the TCIB Payment Scheme is housed in the SADC Beige Boo sub-section 7.5.11 and are based on the operating model.

2.2.4.3 MESSAGE STANDARDS

The SADC TCIB message standards are housed on SWIFT.com/MyStandards and support the exchange of payments between participants and the RCSO as well as between the RCSO and the settlement system.

2.2.5 PAYMENT SCHEME OPERATOR(S)

The roles and functions of payment scheme operators FI’s aligned to the scheme operating models are outlined in the SADC Beige Book sub-section 7.6.

A copy of an extract of the section of the SADC Banking Association SADC Payment System Business Processes and related documents manual sub section 7.6 (Beige Book)

  • Financial market infrastructure requirements is attached in Annexure B

Operators are authorised to operate in terms of a document entitled;

CRITERIA FOR AUTHORISATION TO ACT AS SADC REGIONAL CLEARING AND SETTLEMENT SYSTEM OPERATOR (RCS SYSTEM OPERATOR) FOR CROSS BORDERPAYMENTS WITHIN SADC.

This document is attached in Annexure C

2.2.6 PAYMENT SERVICE PROVIDERS (USERS)

These are the entities that have been authorised by their central bank regulator to participate in a payment scheme. These can be both banks and non-banks. In the SADC context they are required to sign an Assent Agreement when joining a SADC payment scheme. This binds them to the rules, agreements and standards governed by the PSMB.

See copy of a SADC Payment Scheme assent agreement in annexure D

2.2.7 PAYMENT PLATFORM SERVICE PROVIDER(S)

The payment processing platform can be provided by the FI itself, or be outsourced, or be provided in partnership with other appropriate organizations.

There may be regulatory requirements regarding storage of data etc. and these need to be complied with.

2.2.8 SOFTWARE/HARDWARE AND NETWORK PLATFORMS

The software/hardware and network platforms will be determined by the FI’s but may be subject to regulatory oversight and in some cases approval.

SADC has specified certain criteria in this regard to ensure suitable interoperability between participants, soundness and reliability of the operations.

2.2.9 SOFTWARE STACK

This refers to the software employed by the FI’s in the operating architecture. The main function of the software is to action data received in terms of the operating model, process the data and provide the necessary output of data. The solutions/applications employed will be determined by the FI’s and be subject to regulatory interrogation and requirements where necessary.