What Would You Do If You Were Regulator For A Day?

Admit it.

You’ve thought to yourself (and maybe even said out loud) that if only the regulators had listened to you, that the current regulatory environment in payments and financial services would be better. Where “better” is defined, of course, as advantaging your own particular venture or set of interests.

For instance, interchange would be lower – or higher. Regulatory oversight for non-FIs would be more relaxed – or more stringent. The government’s role in protecting consumer privacy would be more defined – or less involved. Bitcoin would be regulated – or kicked to the curb.

Turns out that it’s not all that easy to walk in the shoes of a regulator. And certainly impossible to please all of the people all – or even much – of the time.

But what if you could be regulator for a day? And decide how three of the most pressing issues in payments should be regulated – or not: Financial Inclusion, Cybersecurity and Real-Time Payments?

Now it’s your turn to try on those shoes.

And, potentially influence how the regulatory dye for these three issues is cast.

On March 19, 2015, in front of the delegates of the Innovation Project 2015, five Think-a-Thon teams will debate the regulatory pros and cons of the propositions we have devised.

But with a twist.

These debates will reflect the point of view of the regulators and regulation.

And, we have invited regulators to listen in to what is debated and discussed. The goal is to provide them with a mechanism to assess all aspects of these issues and to consider all sides of an argument when thinking about the complicated issues that are at the heart of our Think-a-Thon agenda and likely also on their own priority lists

The three issues (and working hypotheses) Financial Inclusion and Access, Cybersecurity and Real-Time Payments – are beyond the scope and control of any individual player or aspect of the ecosystem.

And, these issues all have the potential for regulatory intervention, depending upon the actions (or non-actions) of the sector.

Judges will listen in as teams debate each issue and each side and decide which side of the issue has the most compelling, sound and persuasive position. Regulators will share their reactions to what they have heard in front of our Innovation Project 2015 delegation, as well.

And, this is only open to Innovation Project 2015 delegates on a first come, first serve basis.

So, what would you do if you were regulator for a day?

Join us at Innovation Project 2015 and you just might have that chance!

Innovation Project 2015 Propositions to Debate

Background details on each of the three propositions can be found here.

FINANCIAL INCLUSION | Providing affordable access to financial services to the un- and underserved.

Propositions to Debate

Regulators should take adopt a “light” regulatory approach for non-bank entrants into financial services. As an example of a “light” regulatory approach Central Banks in several African companies required mobile money providers to keep an amount equal to the value mobile money issued in a regulated bank account to ensure that consumers didn’t risk losing funds. Beyond that, Central Banks imposed little regulation. Regulators could reconsider this approach in 10 years based on the evolution of the market and impose stricter regulations as the market matures.

Governments in developed countries such as the US should establish a mobile money platform with cash-in/cash-out services provided at post offices or other government-controlled locations. The government, or a private party contracted by the government, would operate the basic mobile money platform. The platform would be open to other service providers who could develop financial services products based on mobile-money and mobile apps. In this way the government would operate the basic infrastructure for mobile payments and encourage competition in the provision of services using that system.

CYBERSCECURITY | Protecting consumer and businesses financial information and payments data from compromise

Propositions to Debate

Financial institutions lack proper incentives to prevent cyber-attacks and the result is that their customers are in jeopardy as is the broader economy. The government should require large financial institutions to have a head of cyber-security who reports to the CEO and board; require these institutions to report cyber-attacks to a designated government entity; and impose substantial penalties on large financial institutions for cyber-attacks that they could have reasonably prevented. These requirements cover not only the financial institution itself but also products created by the financial institution such as payment cards in which the cyber-attacks could hit retailers or acquirers; financial institutions would bear responsibility for these.

Current laws and enforcement are too weak to deter cyber-attacks. The government should forthwith do the following. (1) It should create a new agency tasked with deterring, investigating and prosecuting cyber-attacks. This agency would deal not only with financial institution related cyber-attacks but also those against other businesses and national infrastructure. (2) It should impose much stricter penalties, including mandatory jail sentences, on individuals that participate in the cyber-attacking ecosystem at any level. (3) Participation in the SWIFT system should be conditioned on countries participating in extradition treaties concerning alleged cybercriminals and not countenancing an active cyber-criminal network in their countries.

REAL-TIME PAYMENTS | Delivering real-time clearing and settlement of small value payments to consumers and businesses

Proposition to Debate

The Federal Reserve Board should require that US banks develop and implement within 5 years a real-time payments system that would enable the real-time clearing of small value (less than $100,000) debits and credits against demand depository accounts. It should also require that real-time payments clear at par. This system would encourage innovation and competition in payments. In debating question the team is permitted to advocate modifications to this proposal.

Join us at Innovation Project 2015 – and help us shape the future of three of the most important issues our industry will face in 2015 and beyond.