General guidance for national payment system development

January 2006

Foreword

There is no single recipe for effective development of a national payment system, but the questions countries undergoing a reform process ask themselves are largely similar. For example, who should be involved and who should initiate the process? What are the priorities in which to invest and are they based on a solid understanding of the payment system? What are the different infrastructures needed and what are their supporting institutional arrangements?

This report, which was initiated by the Committee on Payment and Settlement Systems (CPSS) under the leadership of its former Chairman, Tommaso Padoa-Schioppa, aims to give assistance and advice on the planning and implementation of reforms in national payment systems. It underlines that payment system development is a complex process that should be principally needs-based, not technology-based. Payment system reforms depend on parallel development of the banking system, institutional arrangements for payment services and payment infrastructures, and should therefore be a cooperative effort among the banking sector, regulatory agencies and other relevant stakeholders. The report includes 14 guidelines and accompanying explanatory text on payment system development. The report also includes implementation sections, which illustrate the guidelines with practical examples, issues and possible approaches to implementation. In preparing the report, the CPSS drew on the contribution of a working group, which consisted of a broad range of central bank experts from developed and developing countries around the world.

A consultation version of this report was published in May 2005 and was discussed in regional consultations with payment experts from central banks and the financial community around the world. The report benefited from the numerous comments received during a consultation process. Overall, the wide-ranging consultation confirmed that the framework and substance of the report can be useful to countries engaged in reforming and developing their national payment systems.

The CPSS is very grateful to Tommaso Padoa-Schioppa for supporting this project, and to the members of the Working Group, its Chairman, Sean O'Connor of the Bank of Canada, and the CPSS Secretariat at the BIS for their excellent work in preparing this report.

Timothy F Geithner, Chairman
Committee on Payment and Settlement Systems