00:02 My name is Colin Coulter,
00:03 and I am a consultant for the World Bank's Project FAST.
00:06 FAST,
00:07 or frictionless Affordable,
00:08 Safe,
00:08 Timely Transactions,
00:10 is a flagship project of the World Bank
00:12 and focuses on accelerating the adoption of fast payment systems
00:16 in low and moderate income countries.
00:18 Generously supported by the Gates Foundation,
00:21 Project Fast works to expand knowledge,
00:23 build capacity in key institutions,
00:25 raise awareness,
00:27 coordinate global stakeholders,
00:28 and provide technical assistance for the adoption of fast payment systems
00:32 around the world.
00:33 As a reminder,
00:35 all of the work of Project Fast,
00:36 as well as the recording of this webinar,
00:38 can be found on a dedicated website,
00:41 fastpayments.worldbank.org.
00:44 Today
00:45 we are continuing our webinar series this time
00:48 focusing on the role of dispute resolution mechanisms
00:50 in fast payment systems,
00:52 and we really have the perfect guest
00:54 to lead us through that conversation,
00:56 Jose Antonio Garcia Garcia Luna.
00:59 Jose Antonio is currently a senior payments
01:00 advisor for the payment systems development group,
01:03 the World Bank.
01:04 He's mostly involved in assisting countries in
01:06 the implementation of fast payment systems.
01:08 In assessing payment and other settlement systems
01:10 on the basis of the CPMI IOSCO PFMIs
01:13 and in financial inclusion initiatives like the World Bank Group CPMI,
01:17 uh,
01:18 work on payments aspects of financial inclusion.
01:21 He's also been involved in the production
01:23 of international standards and best practices.
01:26 Most recent country engagements include Albania,
01:29 Chile,
01:29 Colombia,
01:30 Dominican Republic,
01:31 Indonesia,
01:32 Paraguay,
01:33 South
01:33 South Africa,
01:34 Uruguay,
01:35 and Vietnam.
01:36 Antonio has held senior positions across finance,
01:40 education,
01:40 payments,
01:41 investment,
01:41 and credit.
01:43 He's led the program program on financial literacy at the Universidad Ahuac
01:47 in Mexico City,
01:48 and he has served as deputy CEO
01:50 of Infonico,
01:51 a state-owned financial institution based in Mexico City
01:55 that provides consumer loans to low-income workers.
01:58 Mr.
01:58 Garcia has also been a senior payment system specialist at the World Bank,
02:03 a senior economist at the Center for Latin American Monetary Studies,
02:06 and
02:07 a credit analysis specialist Abanco and Bursa,
02:10 both in Mexico City.
02:11 And so we really have the absolute perfect guest
02:14 with us today,
02:15 uh,
02:16 to walk us through that conversation.
02:17 And so with that,
02:18 Jose Antonio,
02:19 I hand the floor to you.
02:22 Thank you so much,
02:23 Colin.
02:24 It's really a pleasure
02:25 to participate in this new webinar.
02:27 Uh,
02:28 today,
02:28 we have a very,
02:29 very interesting topic.
02:30 It's about,
02:31 uh,
02:32 solving,
02:33 trying to solve in a in a balanced manner disputes that may arise
02:37 as a result of payment activity,
02:39 in particular,
02:40 fast payments.
02:41 Uh,
02:42 let me
02:43 share my screen
02:45 so that we can begin.
02:49 OK.
02:52 OK.
03:01 OK.
03:03 Here we go.
03:05 So,
03:06 let's start.
03:07 Uh,
03:08 when we are talking about a dispute,
03:10 what are we referring to
03:12 for the specific context of
03:14 payments?
03:15 Well,
03:16 we're going to adopt this definition.
03:18 Disputes
03:19 refer to
03:20 payments that have been executed,
03:23 but that are contested by any
03:25 of the parties involved.
03:28 And disputes may also refer to
03:31 other payment activities that are
03:33 contested.
03:34 For example,
03:35 uh,
03:37 a payment that actually was not created
03:40 to a beneficiary,
03:41 I mean the payment was probably not executed and there
03:43 might be a dispute on why it was not executed
03:46 as expected by
03:48 the payer.
03:49 Uh,
03:50 in disputes,
03:51 as you can imagine,
03:52 we have,
03:53 uh,
03:53 at least 2 parties involved
03:56 and
03:57 we're gonna
03:58 divide them into two broad categories.
04:01 The first one for the purposes of this uh webinar,
04:04 uh,
04:04 are those,
04:06 and the first category involves end users.
04:10 Uh,
04:11 end users that are involved in a dispute,
04:13 it could be,
04:14 for example,
04:15 a payer
04:16 versus
04:17 its payment service provider
04:19 or
04:19 a payer versus a payee
04:22 or the payee versus its
04:24 PSP payments service provider.
04:26 And the second broad category
04:29 is
04:30 the one that refers to disputes
04:32 that
04:33 have to do with differences between payment entities.
04:37 Payment system operators and so on.
04:39 This means that there is a dispute between one PSP and another PSP
04:44 or a PSP versus the payment system operator or PSO.
04:49 So,
04:49 these are the two broad categories.
04:51 However,
04:51 for the purpose of this
04:53 webinar,
04:54 we are going to focus
04:55 mainly on disputes that involve
04:58 end users.
05:00 In this area,
05:02 We have some international standards already in place.
05:05 These are the OECD G20 financial consumer protection principles.
05:11 These
05:12 standards call for accessible,
05:13 fair,
05:14 efficient consumer campaign handling.
05:16 And importantly,
05:18 these are intended to apply to any type of financial services.
05:22 I mean,
05:23 these were,
05:23 these were not created specifically for payments,
05:26 but they do
05:27 include
05:28 payments.
05:30 Uh,
05:31 then for disputes that involve end users,
05:33 what is the typical flow here,
05:35 I mean,
05:35 very quickly we're gonna discuss this in much detail throughout the presentation.
05:39 Well,
05:39 the first step is,
05:40 of course,
05:40 uh,
05:41 a customer files a complaint.
05:43 This complaint is validated by the PSP.
05:47 Or eventually it could be uh through the payment system operator or eventually by
05:52 the regulator.
05:54 The first step is the actual investigation
05:56 and then at the end,
05:57 we come to a resolution.
05:59 This resolution could be in the end
06:01 a refund,
06:03 a reversal,
06:04 some kind of corrective action,
06:06 or probably
06:07 no
06:08 refund at all.
06:10 Uh,
06:11 what are the crucial aspects for consumer protection?
06:13 This is going to be
06:15 the emphasis of this presentation,
06:16 so very quickly here,
06:17 but I'm going to go into much detail,
06:19 uh,
06:19 later on,
06:20 uh,
06:21 there has to be clarity on liability,
06:24 meaning who
06:26 in the payment chain
06:27 will be liable in the event
06:30 there is some kind of dispute.
06:32 To have very clear procedures including timelines,
06:36 timelines for,
06:37 as I said before,
06:39 for investigation,
06:39 resolution,
06:40 etc.
06:40 etc.
06:41 and transparency.
06:44 And finally,
06:45 as part of this overview,
06:46 I just wanted to mention quickly
06:48 what are the most common causes for disputes.
06:50 Uh,
06:51 there are 3
06:52 main,
06:53 uh,
06:54 3 main causes.
06:56 The first one is fraud.
06:58 We have seen this over the last few years,
07:01 especially for fast payments,
07:03 uh,
07:04 what is called authorized push payment or APP scams.
07:09 Uh,
07:10 in
07:11 the payments world,
07:12 there are what we call
07:14 full payments in which
07:15 the beneficiary of the payment is the one that requests
07:19 settlement of the funds
07:21 and then you have push payments in which it is the payer,
07:25 the one that initiates
07:26 the settlement of the funds.
07:28 So,
07:29 it is very difficult
07:31 to reverse a payment
07:32 if the payer actually authorized
07:35 the payment,
07:36 but
07:37 There could be scams
07:39 in this area.
07:40 This is what again we refer to the APP scams,
07:43 uh,
07:44 also as part of social,
07:45 social engineering
07:46 or probably
07:48 there was a theft of the credentials
07:50 of this uh player.
07:52 Uh,
07:53 another important cause
07:54 of dispute is that
07:56 the goods and services that were purchased
07:59 were not received
08:00 or were not received as expected,
08:02 meaning in terms of our quality,
08:04 etc.
08:06 This happens especially
08:07 in e-commerce.
08:09 And finally,
08:10 another main cause is errors.
08:13 This could include
08:14 uh events like misty amounts,
08:17 uh,
08:17 wrong recipient.
08:18 There could be also technical glitches
08:21 uh and and others,
08:22 but,
08:23 but these are,
08:23 are the main ones.
08:25 We do have,
08:25 just to mention that as part of the tools
08:28 of FA,
08:30 we do have specific uh
08:32 document,
08:33 a note,
08:33 a focus note
08:34 on fraud.
08:36 So,
08:36 uh,
08:36 I really recommend for uh our audience,
08:39 our viewers
08:40 to refer to,
08:41 to that focus note for more details on,
08:43 on fraud.
08:48 Then,
08:48 as I said before,
08:49 there are international standards for consumer protection,
08:51 but here we are referring to
08:53 specifically to disputes when it comes to fast payments
08:56 and what are then the unique aspects
08:58 of disputes involving fast payments?
09:00 Well,
09:00 there are,
09:01 I would say,
09:01 uh,
09:02 3 at least.
09:04 The first one is that
09:06 fast payments by their own definition are
09:09 payments that are credited to the beneficiary in real time or close to real time
09:14 and those payments are irrevocable.
09:17 In practice,
09:18 you can imagine that if the payment is created in real-time
09:22 to from,
09:22 let's say to Party B,
09:24 then that Party B can also transfer those funds immediately
09:28 to other parties.
09:29 So,
09:29 it is extremely difficult
09:31 in practice to try to revert the transactions
09:34 and beyond that,
09:35 legally it is,
09:36 uh,
09:36 you can not possible to revert the transaction,
09:40 although there are mechanisms that can be
09:42 adopted and we're going to discuss that.
09:44 Uh,
09:45 expectations of end users.
09:47 Uh,
09:48 fast payments are increasingly used for,
09:50 uh,
09:51 commercial transactions,
09:52 not just for person to person payments,
09:55 and
09:56 in this case
09:57 for
09:58 transactions
09:59 like per person to merchant or person to business,
10:03 then
10:03 users
10:04 are somehow expecting to have
10:07 similar
10:09 uh chargebacks,
10:10 chargeback models as the ones that we have on payment cards,
10:14 credit cards and debit cards,
10:15 hm.
10:16 As I was saying before,
10:18 in payments,
10:18 we have a pool transactions and pull transactions.
10:21 In the,
10:22 in the payment card world,
10:23 these are pool transactions,
10:24 so in that case,
10:26 there has been a model
10:27 already uh for many years
10:30 in which since it is the beneficiary,
10:32 the one that request the settlement of funds,
10:34 there is,
10:35 let's say,
10:36 uh,
10:36 a doubt,
10:37 a potential doubt
10:38 that the transaction is legitimate,
10:40 so,
10:41 uh,
10:41 there is a chargeback model in place,
10:43 and then
10:43 in the case of fast payments,
10:45 There is also an expectation
10:47 when,
10:48 when a person pays a merchant
10:50 that this will happen the same.
10:52 However,
10:53 most fast payment systems
10:55 still lack similar comprehensive
10:57 dispute resolution framework as payment cards.
11:01 And,
11:01 uh,
11:01 as we mentioned before,
11:03 uh,
11:03 there are,
11:04 uh,
11:05 increasingly challenges related to fraud.
11:07 Why?
11:08 Because real-time settlement attracts fraudsters.
11:11 We mentioned before APP scams
11:13 and phishing.
11:14 Uh,
11:15 UK and Brazil,
11:16 among others,
11:17 I mean this is,
11:18 let's say I think that is almost universal right now,
11:21 these,
11:22 but these countries in particular are reporting significant
11:25 APP authorized post payment fraud losses.
11:30 So,
11:32 let's also try to have a
11:33 potential classification of dispute resolution mechanisms.
11:37 Uh,
11:38 I
11:39 put them in 3
11:40 very,
11:41 let's say broad baskets.
11:43 The first one,
11:44 the one to the,
11:45 to the column to the left.
11:47 is,
11:48 uh,
11:49 DRMs or dispute resolution mechanisms that are
11:52 based on legal and regulatory provisions.
11:56 Uh,
11:56 well,
11:57 these provisions establish
11:59 baseline
12:00 statutory protections
12:02 and liability allocation.
12:04 Uh,
12:05 typical laws in which you find this,
12:07 this,
12:07 uh,
12:08 let's say statutory provisions are the funds transfer laws
12:11 or the payment system law,
12:12 etc.
12:14 Uh,
12:16 Here,
12:16 the point is that this is almost always very general.
12:22 Typically,
12:23 laws and regulations do not include all the details that are needed
12:26 for
12:27 a dispute resolution process to be,
12:29 let's say,
12:30 uh,
12:31 easily performed.
12:34 Um,
12:34 central banks
12:35 and other regulators may set refund rights,
12:39 uh,
12:39 specifically defining who is liable
12:41 for what type of transaction,
12:43 uh,
12:43 whether a refund will be total or partial,
12:46 etc.
12:48 There is a case
12:49 in which some
12:50 regulators require,
12:52 uh,
12:52 PSPs to provide unconditional refunds.
12:56 This is the case,
12:56 for example,
12:57 in the UK
12:58 where the payment systems regulator or PSR
13:02 requires these unconditional refunds for any unauthorized transaction.
13:07 Then the second category,
13:09 broad category are
13:10 scheme level-based
13:12 VRMs.
13:14 In this case,
13:16 scheme rules govern dispute reporting.
13:19 liability,
13:20 PSP obligations,
13:21 and so on.
13:23 Typically,
13:24 these rules
13:26 are
13:27 at a much more detailed level
13:29 than
13:29 legal and regulatory provisions.
13:32 They usually include
13:33 specific timelines for handling a dispute,
13:36 escalation paths,
13:38 cooperation requirements between PSPs,
13:39 etc.
13:42 And
13:43 the third category
13:44 are VRMs based.
13:46 On industry initiatives.
13:49 This is the case
13:50 where government regulation is light.
13:54 I'm,
13:54 I'm referring,
13:55 of course,
13:55 for payments,
13:56 when regulation of payments is light.
13:58 In this case,
13:59 industry codes are often developed
14:01 and these are typically adopted
14:03 on a voluntary basis.
14:06 As examples,
14:07 we have the case of Australia's e-payments code
14:10 or South Africa's code of Banking Practice.
14:14 And
14:15 as I will discuss later,
14:17 the three have,
14:18 of course,
14:19 pros and cons.
14:21 We will see that probably the best scenario would
14:23 be a combination of at least 2 of these.
14:28 Well,
14:28 what are the good practices when it comes to
14:31 dispute resolution mechanisms?
14:33 This is actually the core of this presentation.
14:35 We are gonna discuss each of these 6
14:39 practices in detail,
14:40 so I'm gonna just mention them quickly here
14:42 and then
14:43 uh analyze them in detail,
14:45 uh,
14:45 starting from the next slide.
14:47 What are the good practices?
14:48 Well,
14:49 standardized and transparent processes.
14:52 Then to have mechanisms for all types of disputes.
14:57 Uh,
14:58 place emphasis on preventing fraud.
15:02 have a combination of legal scheme and industry-led tools.
15:09 have adequate funding for the dispute resolution mechanism.
15:13 And
15:14 then
15:15 achieve the proper balance between collecting granular data
15:20 and
15:20 privacy.
15:22 OK,
15:22 so let's go one by one.
15:27 So first,
15:28 good practice,
15:29 create standardized and transparent processes.
15:32 Uh,
15:32 for each of these six categories,
15:34 I'm gonna
15:35 first mention what I believe is the core idea.
15:38 So,
15:38 in this case,
15:38 what is the core idea of having standardized and transparent processes?
15:42 Well,
15:43 having
15:44 uniform,
15:45 clear,
15:45 and well-defined processes
15:47 definitely helps to build trust and predictability
15:51 in fast paces.
15:53 What are some of the key actions
15:55 that could be developed?
15:59 Well,
15:59 develop
16:00 standard rules.
16:02 And also I would say detailed rules on
16:05 who
16:06 is liable.
16:07 On documentation that is required.
16:10 On timelines for dispute filing,
16:13 investigation,
16:13 and resolution.
16:16 Ensure that these rules that I mentioned in
16:19 the previous bullet point ensure that these are accessible
16:23 and that they are clear
16:24 to end users and also
16:26 to
16:27 payment service providers.
16:29 And that,
16:30 as I said before,
16:30 that they are accessible,
16:31 meaning that they can be found either
16:33 in a branch or in any digail channel,
16:36 uh,
16:36 etc.
16:38 And also very important
16:40 is
16:41 harmonized processes across the various entities that
16:44 are involved in the dispute resolution process,
16:47 meaning that
16:49 typically
16:50 the,
16:50 for example,
16:51 a payer
16:52 will will raise a dispute with its own payment service provider,
16:56 but then
16:57 it is very likely that the payment system operator will also be involved
17:01 and then probably also the PSP or payment service provider of the payee.
17:05 So,
17:06 these three entities
17:07 The two PSPs,
17:08 one of the parent and one with the P,
17:10 and also the PSO,
17:11 they have to have harmonized processes,
17:13 otherwise it's going to be
17:14 very,
17:14 very difficult and costly
17:16 to handle this dispute.
17:18 As a good example,
17:20 here we have the case of Brazil's peaks regulations.
17:23 In this case,
17:24 uh,
17:25 it is very detailed,
17:26 it is based on law.
17:28 These are,
17:29 uh,
17:29 based again,
17:30 law-based dispute procedures that avoid ambiguity and ensure clarity of growth,
17:35 and
17:35 there is a central bank committee
17:37 that designs and enforces standardized processes for
17:41 dispute resolution in connection with peaked fast payments.
17:49 The second
17:50 best practice
17:51 is to
17:52 have or provide mechanisms for all types of disputes.
17:57 Uh,
17:58 different disputes require different mechanisms,
18:00 as you can imagine,
18:02 mhm.
18:02 Then
18:03 fast payment systems,
18:05 the DRM,
18:06 uh,
18:06 and the dispute resistance mechanisms must cover both end user issues as well as
18:12 inter-participant,
18:13 uh,
18:14 issues.
18:16 4
18:18 Participant disputes.
18:19 Participants,
18:19 I'm referring again to PSPs,
18:21 payment service providers,
18:22 payment system operators,
18:23 and so on.
18:25 Scheme rules should define
18:28 Again,
18:29 who is going to pay,
18:29 meaning where is the liability or
18:31 to what extent there will be a sharing of the liability?
18:35 What are the possibilities and limits and limits
18:38 for direct negotiation between the parties?
18:41 And
18:42 what will be in case they are necessary,
18:44 the arbitration challenges.
18:48 For end users,
18:49 it is very important to
18:51 uh offer multiple accessible channels for filing disputes,
18:54 hm.
18:55 Uh,
18:57 You could have it,
18:58 for example,
18:59 in the,
18:59 in an online portal,
19:00 I mean like in the
19:02 internet banking
19:03 or even in mobile banking
19:05 or to have a call center
19:07 or even in some cases like in the case of a UPI in India,
19:11 that the,
19:12 the channel for filing the dispute could be in in app directly
19:15 in the app.
19:17 Uh,
19:18 also very important in the case of end users is to
19:21 have a mechanism that supports convenient
19:24 data capture.
19:25 I'm referring here to the ability to easily upload documents
19:29 and photos.
19:30 And also efficient case management.
19:34 And then it is also very important
19:36 that
19:37 the
19:38 uh
19:39 the dispute resolution mechanism
19:41 coordinates with
19:43 police
19:44 and other financial authorities
19:46 to simplify fraud reporting.
19:49 Uh,
19:49 as I will mention in maybe one or two slides,
19:52 reporting fraud is very important
19:54 to share information in this area so that other entities
19:58 actually are
19:59 updated on what are the trends
20:01 and actually can fight it.
20:04 And some other practices here
20:07 we have,
20:07 for example,
20:09 card network tools like Eoca and Verify.
20:12 These ones,
20:13 I mean,
20:14 what they do is that
20:15 they send very,
20:17 let's say,
20:18 quick
20:19 and early information
20:20 to the involved actors
20:22 so that unfounded
20:24 chargebacks
20:25 are prevented.
20:27 For example,
20:27 I could say,
20:28 I mean,
20:29 if I'm a fraudulent,
20:31 you know,
20:31 pair,
20:31 I could say that actually I did not receive
20:33 the goods and services that I purchased and I'm
20:36 immediately requesting,
20:37 demanding
20:38 a refund.
20:39 But entities like this actually can help
20:42 the merchants to verify that the goods and services were actually delivered
20:47 and uh as,
20:47 as promised.
20:53 The 3rd best practice.
20:56 Focus on fraud prevention
20:59 and detection.
21:01 The core idea here
21:03 Uh,
21:04 starting from the fact
21:05 that I mentioned before that fraud is now a dominant risk in past payments.
21:10 Then
21:10 ideally,
21:12 DRMs should be
21:14 a last resort
21:15 only after preventive measures have failed.
21:19 Good practices here include
21:22 prioritizing
21:23 end-user education on scams and social engineering.
21:28 Of course,
21:29 this is very easy to say and difficult to do in practice because
21:32 these
21:33 things keep changing
21:34 day by day,
21:35 but still,
21:36 uh,
21:38 Consumers and users have to be informed that these things can happen to them.
21:44 Uh,
21:44 a second good practice here is to use pre-transaction tools,
21:49 I mean,
21:49 before the transaction is actually executed,
21:52 and some of these are,
21:53 for example,
21:54 strong customer authentication.
21:57 And
21:58 confirmation of payee services.
22:00 Uh,
22:02 strong customer authentication,
22:03 remember that I mentioned before,
22:04 the causes of fraud
22:06 is that
22:07 in many cases the credentials
22:09 of the payer
22:10 are stolen.
22:11 So,
22:12 when you have strong customer authentication or SCA,
22:15 this becomes a barrier against this,
22:18 and then also,
22:19 I also mentioned that
22:20 there could be errors
22:21 and probably there was a wrong recipient of the payment.
22:24 When you have this service confirmation of payee,
22:26 this can be significantly reduced.
22:30 Then I was going to jump in real fast as a quick note for our audience that
22:33 we also have a webinar and we also
22:35 have a technical note on prominent overlay services,
22:38 um,
22:39 such as request to pay,
22:40 but really on,
22:40 you know,
22:41 confirmation of payee that gets a little more into
22:43 the details on the back end of all this,
22:45 uh,
22:46 of some of those,
22:47 those pre-transaction tools,
22:49 uh,
22:49 that of course on the website and then back to you.
22:52 Thanks,
22:52 Jose Antonio.
22:54 Thank you,
22:54 Connie.
22:55 That's an excellent point.
22:55 Yes,
22:56 absolutely.
22:57 I mean,
22:57 these things are becoming standard,
22:58 meaning that they are
23:00 no longer things that could be there,
23:01 but they're actually that must be there
23:03 for services to actually be trustworthy.
23:08 Uh,
23:08 the third point here,
23:09 uh,
23:10 establish shared databases of fraudulent accounts and patterns,
23:14 uh,
23:15 including real-time fraud analytics,
23:16 that is what I mentioned before,
23:18 that ideally,
23:19 uh,
23:19 the PSPs that have somehow,
23:21 uh,
23:22 experienced,
23:23 uh,
23:23 fraud
23:24 based on the complaints of their,
23:27 their customers,
23:28 they actually they share this information
23:30 so that everyone
23:32 In the fast payments community
23:34 is informed about the new trends
23:35 and
23:36 And information.
23:38 Here,
23:38 for example,
23:39 the operator
23:40 or the regulator could act as a central monitor
23:43 tracking
23:44 disputes,
23:45 trends,
23:46 uh,
23:46 etc.
23:48 and
23:48 as I said before,
23:49 it's very important to implement feedback loops between
23:52 PSPs
23:53 and
23:54 between PSPs and the operator
23:56 and also the regulator.
23:59 Here,
23:59 the point again is
24:01 to try to prevent fraudulent payments before they actually occur.
24:10 The 4th
24:11 best practice when it comes to dispute resolution mechanisms invas V.
24:16 Implement a combination of different tools,
24:18 legal,
24:19 scheme level,
24:19 and industry
24:21 to cover the various aspects of dispute resolution.
24:24 You may remember that I mentioned these three broad categories
24:26 of DRMs and that I said that ideally a combination
24:31 could work better.
24:32 Mhm.
24:33 This is the core idea actually that I mentioned here,
24:35 that combining tools yields increasingly comprehensive DRMs.
24:40 Uh,
24:40 legal tools,
24:42 as you can imagine,
24:43 these define
24:44 legally enforceable rights and obligations for users,
24:47 PSPs and operators and schemes,
24:49 and they also enable
24:51 cooperation for law enforcement.
24:53 In contrast,
24:55 uh,
24:55 scheme tools this create
24:57 operational level procedures for handling disputes,
25:00 transaction monitoring.
25:03 Fraud handling and so on.
25:04 So,
25:05 to a large extent there is complementarity between these two,
25:10 to put it in simple terms,
25:11 the legal framework says actually what must happen,
25:15 though again
25:16 this is at a very general level
25:19 and then scheme rules
25:20 tell you
25:21 how it should happen.
25:24 And,
25:25 um,
25:26 Also,
25:27 there is a potential tension here
25:29 that uh could be somehow uh solved
25:32 with the complementarity that I mentioned before.
25:35 Why?
25:35 Imagine that
25:37 you only have legal qualification when it comes to dispute handling.
25:41 This of course improves certainty,
25:43 but can reduce flexibility
25:45 when it comes to novel cases
25:47 and all these,
25:48 let's say,
25:48 uh,
25:49 innovation,
25:50 let's say in fraud that we are witnessing.
25:53 Almost every day.
25:54 So,
25:54 having that,
25:55 uh,
25:55 let's say,
25:55 uh,
25:56 uh,
25:56 uh,
25:56 complementary tools is very important.
25:58 One is,
25:59 this is one of the reasons.
26:01 Here you have an example in the UK.
26:03 The mandatory reimbursement for
26:06 uh authorized postpay fraud
26:08 combined
26:08 with
26:09 the
26:10 COP requirement,
26:11 the confirmation of the confirmation of payee requirement.
26:18 The 5th
26:20 main
26:20 uh
26:22 A good practice
26:23 is consider the role of different pricing structures and revenue models
26:28 to ensure the sustainability of the events.
26:32 Uh,
26:32 the point here is that
26:34 These dispute resolution mechanisms are costly.
26:38 These costs include,
26:40 among many others,
26:42 investigation time,
26:43 a coordination between PSPs,
26:46 uh,
26:47 customer support staff,
26:48 fraud analytics and other tools,
26:50 and so on.
26:51 And when you consider that many fast payment transactions are priced at 0,
26:57 especially for
26:58 person to person payments,
27:00 these
27:00 could eventually make VRNs
27:02 unsustainable from a financial standpoint.
27:06 So,
27:07 what are some sustainable models that we have observed in some jurisdictions?
27:12 This is specifically for DRMs.
27:14 Well,
27:15 you could have some form of crop subsidization
27:18 through value-added services provided by
27:21 the fast payment system.
27:23 Or
27:24 there could be a,
27:25 sorry,
27:26 sorry,
27:26 a change in the pricing policy,
27:28 for example,
27:29 uh,
27:29 there could be some small charges.
27:32 Or
27:33 tier service levels,
27:34 for example,
27:35 some charges for
27:37 uh person to business
27:38 payments or business to business payments and maybe still maintain
27:42 zero or very small
27:44 prices for person to person payments.
27:47 Uh,
27:47 another model is definitely to have some public subsidies like,
27:50 like it is the case in Brazil,
27:52 uh,
27:52 and India.
27:53 I'm referring here,
27:54 of course,
27:54 to the case of India UPI and Brazil pigs.
27:58 And also very important to have a very,
28:00 very realistic and robust calculation of the cost of the DRM
28:04 and also to make these calculations transparent so that
28:08 all the parties that are involved have a good idea of what they are getting into.
28:13 And then what is the main takeaway here is that
28:17 the overall pricing
28:19 and or revenue structure
28:21 of the fast payment system
28:23 should reflect the full service stack
28:25 of that fast payment system,
28:27 not just transaction processing,
28:29 but also dispute handling.
28:34 And then coming to the last one.
28:37 Uh,
28:38 There is,
28:39 as we probably,
28:40 you may remember that we mentioned that it's very important
28:43 to have very good data collection
28:46 to handle fraud.
28:48 To handle disputes,
28:49 to make good analysis,
28:50 and so on.
28:52 But there has to be a balance between collecting this granular information and also
28:57 the privacy of the parties involved.
29:01 What are some good practices?
29:03 Uh,
29:04 collecting
29:05 transaction data
29:07 as granular as possible is very important.
29:10 This could include timestamps,
29:12 uh,
29:13 ID numbers,
29:14 alliances,
29:15 authentication method,
29:17 device info,
29:18 uh,
29:19 the results of the confirmation of PE,
29:21 uh,
29:22 process,
29:23 and so on.
29:24 Very rarely there is a need to actually
29:27 have,
29:27 you know,
29:27 the name of the person here,
29:30 right?
29:30 But still,
29:31 this is very uh granular data.
29:35 Uh,
29:35 adopt standardized messaging and formats,
29:38 in particular ISO 20022.
29:42 Uh,
29:43 as I mentioned before,
29:44 using aggregate and or depersonalized data for
29:47 further analytics and registries is typically sufficient.
29:50 Again,
29:51 you do not need to include in this type of analysis the name of the person
29:54 or any other variable through which that person can be identified,
29:58 person or,
29:58 or,
29:59 or firm,
29:59 of course.
30:01 And also design
30:03 data sharing protocols early in the development of the fast payment mechanism
30:08 to avoid retrofit costs and compliance risks.
30:11 So,
30:11 here again,
30:11 the point is
30:13 by doing this,
30:14 uh,
30:15 enable faster,
30:17 more accurate and accountable dispute handling while maintaining user privacy.
30:25 So,
30:26 after this discussion on best practices,
30:28 let's try to go to some counter examples.
30:32 Here we have
30:33 9 examples.
30:35 Again,
30:36 I really recommend
30:37 our audience to go to
30:39 this specific focus node in which all these country cases
30:43 are discussed in much more detail than here.
30:45 Uh,
30:46 uh,
30:47 for the purposes,
30:47 for the purposes of this webinar,
30:48 I'm only going to go
30:50 through some of the main points of one of these cases to make a,
30:53 to try to,
30:54 to contrast the differences,
30:56 uh.
30:57 In the case of Australia,
31:00 Uh
31:01 In Australia,
31:02 the fast payment system MPP,
31:04 this is operated by a private sector entity.
31:07 Mhm.
31:07 What is the approach then?
31:09 It is essentially
31:10 scheme level,
31:12 meaning that the operator
31:13 of MPP is the one that is
31:15 setting
31:16 the rules and procedures
31:18 and it is complemented
31:20 with a voluntary codes,
31:21 a voluntary code,
31:23 the
31:24 Australia e-payments code.
31:27 Uh,
31:28 But you can see the case of Bahrain
31:31 that is somehow similar.
31:33 In this case,
31:34 Benefit Co if the operator is a private sector entity,
31:38 but
31:39 The mechanism they have developed
31:41 is
31:42 much less robust.
31:44 Uh,
31:45 they only have a centralized call center,
31:47 and
31:48 they actually,
31:49 in most cases,
31:50 uh,
31:51 they
31:52 try to somehow get to a bilateral resolution,
31:55 uh,
31:56 of,
31:56 uh,
31:56 dispute between PSPs.
31:59 Mhm.
32:00 In this case,
32:01 uh,
32:01 Bahrain,
32:02 if you read the,
32:02 the case study in the focus note,
32:04 you will see that in this case,
32:06 customers are,
32:07 in most cases
32:08 directly liable,
32:09 uh,
32:10 for,
32:10 for,
32:11 for most frauds.
32:14 In the case of Brazil and Mexico,
32:16 these
32:17 fast payment systems are operated by central banks.
32:20 So you can imagine that the approach to dispute resolution is
32:24 legal and regulatory based,
32:26 mainly.
32:28 Uh,
32:29 but
32:30 in the case
32:31 of both Brazil and Mexico,
32:33 it is complemented with scheme level provisions.
32:36 I mean,
32:37 the,
32:37 the,
32:37 the operator of picks and spade
32:41 beyond
32:41 the legal provision
32:42 in the
32:44 rules of the system
32:45 have actually uh included things as
32:48 uh what are the timelines
32:50 for uh handling,
32:51 sorry,
32:51 for filing a dispute,
32:53 the times for investigation,
32:55 again,
32:55 who is liable and to what extent,
32:58 uh,
32:58 and so on.
33:00 Then you have,
33:01 for example,
33:01 the case of South Africa.
33:03 South Africa is also
33:04 uh RTC
33:06 with time clearing,
33:07 uh,
33:08 is operated by a private sector entity.
33:10 In South Africa,
33:12 there is
33:13 very,
33:13 very light,
33:15 uh,
33:16 official,
33:17 uh,
33:17 regulation and oversight when it comes to payments.
33:20 In this case,
33:21 there is to a large extent self-regulation,
33:24 so
33:25 essentially there is only a voluntary code of banking practice
33:28 that is complemented
33:30 by an ombudsman.
33:32 I mean,
33:33 in essence,
33:34 uh,
33:35 here,
33:36 customers can escalate the problem to the ombudsman
33:39 in case they
33:41 believe that
33:42 the,
33:43 uh,
33:43 their payment system provider.
33:45 The payment,
33:45 sorry,
33:46 the payment payment service provider
33:48 has not followed
33:50 these codes
33:51 uh as it is supposed to,
33:53 but remember again that
33:55 in most cases adoption of adoption of these codes is voluntary.
34:00 And then let's go to the case of the US.
34:02 In the US
34:03 they have
34:04 at least,
34:05 let's say,
34:06 two
34:06 well-known fast payment systems,
34:08 RTP and FetNA.
34:10 One is operated by the private sector and the
34:11 other one is operated by the Federal Reserve,
34:13 which,
34:13 as you know,
34:14 is a central bank,
34:15 but both are based on regulation.
34:18 I mean the dispute resolution approach
34:20 is based on regulation,
34:21 specifically regulation E
34:23 and
34:24 UCC meaning Uniform Commercial Code 4A,
34:27 and there are also scheme level rules
34:30 and
34:31 because of this combination of regulation and scheme level rules,
34:34 you have also
34:35 detailed provisions.
34:36 For example,
34:37 there is a
34:38 Uh,
34:38 60 to 90 day report window,
34:40 I mean,
34:41 that is the period
34:42 of time in which you can report,
34:43 uh,
34:44 if you can file a complaint
34:46 and then
34:46 there is a 10-day
34:48 investigation period,
34:49 uh,
34:49 and etc.
34:50 So,
34:51 uh,
34:52 again,
34:53 uh,
34:53 I suggest that you go to the document and read
34:56 more about these 9 cases.
35:02 So,
35:02 then
35:03 let me
35:04 try to go through this slide that uh highlights
35:08 the main aspects of uh dispute resolution
35:12 framework
35:13 and how this approach.
35:16 How are these approached
35:17 based on whether the mechanism is centralized,
35:20 regulatory led,
35:21 industry code,
35:22 hybrid,
35:22 etc.
35:24 Well,
35:24 the first,
35:25 uh,
35:26 main feature or dimension.
35:29 Primary liability.
35:32 Uh,
35:33 well,
35:33 in the case of a
35:35 regulatory led or uh based on law,
35:39 Liability is precisely determined by law
35:42 and under the central bank rules,
35:45 but again,
35:45 remember that this is
35:47 very good in the sense that it is uh predictable,
35:51 but
35:52 it will be in most cases determined at a very high level.
35:58 If,
35:59 if,
35:59 if it is an industry code
36:02 that is used,
36:03 then
36:04 primary liability
36:05 is
36:07 usually shared or is voluntary
36:09 because adoption of the code is voluntary.
36:12 Mhm.
36:13 And in the case of a hybrid model,
36:15 then typically the scheme rules will define
36:18 who is liable
36:19 and
36:20 whether it is for the total amount,
36:22 partial,
36:22 and so on.
36:24 The second dimension,
36:25 consumer recourse.
36:28 Uh,
36:28 in the case of a
36:31 regulatory-led
36:32 DRM,
36:34 well,
36:34 there is typically a regulator.
36:37 uh,
36:38 to,
36:39 to which you can actually recur or
36:42 also a formal ombudsman in some cases.
36:46 If an industry code approach is used,
36:48 then typically it is an industry ombudsman.
36:51 Again,
36:51 it's not,
36:52 uh,
36:53 uh,
36:54 well,
36:54 it's formal,
36:54 but it's not,
36:55 let's say,
36:55 uh,
36:56 uh,
36:57 this was not report to,
36:58 to actually to,
36:59 to,
37:00 to,
37:00 to the central bank or to the regulator,
37:03 and still voluntary.
37:07 Dispute challenges.
37:09 Uh,
37:10 in the case of a regulatory-led approach,
37:13 in many cases,
37:14 there will be a central platform in which you can file complaints
37:19 or in app,
37:19 as it is the case of
37:21 uh UPI.
37:23 Uh
37:25 I,
37:26 if it is an industry code
37:28 uh DRM,
37:30 well,
37:30 yes,
37:31 PSPs are at the front line.
37:33 Mhm,
37:33 I mean,
37:34 they are the ones that are
37:35 supposed to handle all the disputes,
37:37 mhm,
37:38 and eventually this can be escalated to an ombudsman,
37:42 but the approach is very different because it is,
37:44 there is no central platform,
37:45 but directly
37:46 the PSP is involved.
37:49 Uh,
37:50 again,
37:50 refund mechanisms,
37:51 they are legally mandated
37:52 in the,
37:53 in the first case
37:54 and
37:55 in the case of the industry code,
37:57 uh,
37:57 DRMs,
37:58 these are essentially voluntary.
38:01 Uh,
38:02 Then let's go to
38:04 the 2nd to last,
38:05 the oversight entity.
38:08 Uh,
38:08 as you can imagine in a regulatory led ERM,
38:11 this mechanism is usually
38:13 overseen by the central bank,
38:15 hm.
38:17 Uh,
38:18 in the case of Brazil,
38:19 it is directly central bank.
38:20 In the case of,
38:21 uh,
38:21 India,
38:22 it is the RBI,
38:23 Reserve Bank of India,
38:24 even if
38:25 UPI is not operated by,
38:27 uh,
38:27 RBI.
38:29 But in the case of an industry,
38:31 industry,
38:31 uh,
38:32 code-based DRM,
38:34 actually the identity will be
38:36 the same industry body.
38:39 So,
38:39 what are the key takeaways of
38:41 these differences?
38:43 Well,
38:43 in a
38:44 legal or regulatory-led DRM,
38:47 a strong regulatory framework ensures uniform protection.
38:51 But
38:53 there is less flexibility.
38:56 In an industry code-based DRM,
38:59 voluntary codes raise coverage and awareness,
39:01 but may lack in compliance.
39:04 And hybrid models as argued before,
39:07 they usually balance flexibility and trust.
39:11 In
39:12 the various parties involved.
39:16 So,
39:18 what is the conclusion?
39:20 Uh,
39:21 successful dispute resolution mechanisms depend on clear liability regimes.
39:27 Collaboration between regulations and industry
39:30 and consumer-centric dispute handling.
39:36 Robust DRMs.
39:38 When I mention robust,
39:39 I'm referring to standardized
39:41 legally sound.
39:43 Uh,
39:43 details,
39:44 etc.
39:45 These are essential to protect consumers and
39:48 maintain
39:49 trust in fast payments.
39:52 Although fast payments are irrevocable,
39:56 Still,
39:57 refunds or returns can be structured.
40:00 Under
40:01 DRM frameworks.
40:04 BRMs
40:06 should keep on evolving
40:07 as fast as fast payments mature
40:10 from general guidelines
40:11 into formalized and
40:14 actually more comprehensive
40:16 mechanisms
40:17 and
40:18 finally,
40:18 but very important,
40:20 fraud prevention strategies
40:21 are
40:22 also a key element of
40:24 every robust DRA.
40:28 So,
40:30 That's it
40:31 for,
40:31 for me for now,
40:32 Colin.
40:34 Let me.
40:34 That was,
40:34 that was wonderful.
40:36 Thank you so much though.
40:37 That hit it right on the,
40:38 right on the nose.
40:39 If you didn't just walk us through,
40:40 you know,
40:41 what
40:42 to think through,
40:43 but how,
40:45 you know,
40:45 some of this combination of legal and different
40:47 scheme levels and thinking through buy-in and coverage,
40:50 but also,
40:51 you know,
40:51 commitment and making sure people are on board
40:53 and prices and how to really operationalize this.
40:57 Long term as well as thinking,
40:58 you know,
40:58 flexibly
41:00 about,
41:00 about DRM,
41:01 uh,
41:02 as well as just like the clarity.
41:04 And this gets back to some of the key
41:05 points about launching and scaling fast payment systems,
41:08 about building trust
41:09 and interoperability
41:11 has incredible benefits,
41:12 but as,
41:13 as long as we do it correctly,
41:15 uh,
41:15 and,
41:15 and with that kind of consumer user focused brain.
41:19 Uh,
41:19 and which is why
41:21 DRMs are so important.
41:22 So
41:23 with that,
41:23 thank you so much.
41:25 Thank you to our audience,
41:26 and we will see you all next time.
41:29 OK.
41:29 Thank you again very much.
41:30 Thank you to everyone,
41:32 and it's been a pleasure.
41:34 Thanks everyone.
41:35 Bye bye.
41:36 Goodbye.
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Also known as instant or real-time payments, fast payments are characterized by the instant transmission of the payment message and by the immediate availability of funds to the beneficiary on a 24/7/365 basis. But what happens when something goes wrong? Who is responsible when a payment is made in error, and how is that responsibility scaled across an entire jurisdiction of payments activity?
In this webinar, Colin Colter (Payments Consultant, World Bank) and José Antonio García García Luna (Senior Payments Consultant, World Bank) discuss the importance and nuances of dispute resolution mechanisms (DRM) in fast payment systems, how they build trust and help settle inter-participant conflict, and various jurisdiction case studies of how they can work in the real world.