Real Time Retail Payment Scheme Governance

Monday January 25, 2021
2:20 PM UTC

Session Leads: Cici Northup, Elizabeth McQuerry, Laura Dreese, Steve Haley (@stevenhaley1), Paul Makin (@PaulMakin)

Session Description: Mojaloop Hub operators normally are implementors of scheme rules that govern what is supposed to happen and what to do when things go wrong. Who decides those scheme rules? What options do consortiums need to consider, regarding the structure and approach to governance of a payments scheme What are the benefits and downsides of each? What are the consequences for the Mojaloop product roadmap, community, roll-out operating model & sales toolkit for the various models?

Session Slides

Session Recording

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Who, in your experience, generally makes the decision about what platform to use in a payment system, is it the payment scheme or the operator?

Is there a link to the decks that you can share with us? Thanks.

This is the billion dollar question. My sense is that scheme usually sets some parameters for needs and the procurement, but selection is done by Operator - with Scheme owner input (veto). However, for many national infrastructure systems, the IFIs fund them and therefore have huge input on the decision rules.

The PASA example as a model for stakeholder engagement is interesting.

As far as I know the schemes under PASA’s governance are not open to non-banks so while there is engagement, ultimately it’s unclear that the needs of non-bank stakeholders are ever actioned in the schemes.

As a result there are a number of interop projects that have never gone beyond proposal stage such as pay by proxy.

thanks for the great presentation. a few questions>
Who owns PDP in Peru? Looks like an interesting model

What are the advantages of for profit or not for profit ownership. What are the implications for being pro poor

Are there examples of MFI associations having ownership of the scheme and being able to cover the operating costs

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@millerabel @adrianhopebailie @PaulMakin @MichaelRichards can we move the cost discussion here?
Adrian - I see your point, so we have to help them overcome not just the initial Capex?

another point in the chat in zoom:

“Additional challenge with Central Bank led model is that financial inclusion is often not part of the central bank’s mandate.
In my experience CB mandate is written in law. It is entirely focused on stability, monetary policy etc. They may have an interest or strategy around inclusion but it’s not part of their mandate. This was my recent experience in discussion around motivations for RFP evaluation by a CB.”

original question from Jill Shemin:

“One thing that is coming to mind is: cost of these things are very different country by country! That really affects what a model or design for pro-poor can be …
(or , the funding model for it at least - how much external money you need.)
I hope that makes sense”

@Steve (and others, of course): it is well-accepted now in the industry that, with the costs of systems today, most any government can achieve cost savings from a national payments platform?
@Steve, really good point to share on what you see in RFPs - thanks for sharing that

from cici:

@Jill - great point. my two cents: The costs borne by those who invest in the scheme can ccertainly vary by context (e.g. build v buy v leverage open source, etc) and ability to scale based on population size and total potential market size (txn volume)). That being said, I think if you build in pro-poor objectives into scheme rules and governance models, the likelihood to incent low cost participant and low/no cost end user pricing increases (and breakevens can eventually be achieved)”

“Great point, Steve. I also think building for scale (in addition to low cost build choices) is something that helps drive low end user pricing.”

from Paul:

"Competition on end user pricing is the most powerful tool; it is enabled by the cost to serve, which we can do something about.
Current estimates of the cost of cash to a country’s economy, as a percentage of GDP:

Efficient eg Scandinavian .25%
Medium eg Benelux 0.5%
Uk France 0.75%
Russia 1%

And up from there. It’s really expensive being a poor country.
So a poor country can’t afford not to try to bear down on cash use. It’s worth investing in a Mojaloop.
Cash use would cost up to 4% in poor countries (direct + indirect)
but for technology choice TCO model is flawed - it needs to be tied sublinear cost model vs low-value txn volume"

“In practice, a five-year TCO [of an application re-platform to open source] shows a cost reduction effect of 78% - 83%.”

Almost every central bank has financial inclusion, economic development and consumer protection built into their mandate. But of course it doesn’t mean they always have the time/space to address all of these.

Aren’t the examples which showed those reductions things like OS, DB etc.? I would expect those to be solutions which are relatively well bounded and amenable to automation. Would it not be the case that far fewer of the costs associated with the implementation and operation of an interop system would be of this type?

Yes, that was my point. :+1:
There is a long history of payment hub projects that only survived a few years because they couldn’t make them viable.

My impression is that this is usually due to a lack of participation in the scheme leading to a lack of volume and therefor lack of sufficient revenue to sustain the scheme.

There is a capex and initial opex amount that will be a ceiling for a scheme to be viable long term and that will be different in each project but we should aim to make Mojaloop as low a contributor to this as possible (both capex and opex). Simply being free because it is open source is not enough.

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I agree @MichaelRichards. A payment hub is a very specialised piece of software.

General purpose OSS projects like DBs generally benefit from wide usage in a variety of scenarios or as the underlying platform for other solutions built by large enterprises. If I recall correctly, in the report they mention wide use of OSS DB systems by social media and tech businesses as an example.

We need to acknowledge that Mojaloop is a niche product and we will not benefit in the same way and will require us to proactively build an ecosystem around it to keep costs down for operators.

Not a single mention of financial inclusion. I was also surprised to learn this when I did.

In a discussion about the evaluation criteria of an RFP by the SARB an advisor to the bank told me not to lean on financial inclusion as a selling point as the bank has no mandate to foster financial inclusion so it can’t apply any weight to that when evaluating proposals.

okay - this is a slick easy to navigate website (+) which makes it clear that financial inclusion is not in the mission (-) - not even lip service :slight_smile: (kudos for clarity though!)

This old position paper from 2011 (yikes) does have some progressive thinking on participation of non-banks. So even if the mission doesn’t state it, the outputs according to this doc aren’t bad.
PP2011_02.pdf (

Yep, that was partly my point. Even if there are people in the bank that are thinking progressively their hands are tied if their RFP evaluation criteria are driven by their mandate and that is all about monetary policy and stability :frowning_face:

yeah … I won’t be responding to any SARB RFPs :slight_smile: