 Thank you to Timothy Massive for those remarks to kick us off today. Next up is the panel Traditional and Evolving Functions of the Financial System, Payments as a Utility, moderated by our own Michael Barr. Live Q&A is available for this session, so please submit any questions to the Engagement Hub for registered attendees under the Day 2 livestream. Hello, everyone. Welcome to our next panel on Payment Systems as a Utility. It's my great honor to be able to lead this discussion, moderate this discussion with distinguished guests. Again, I'm Michael Barr, the Dean of the Gerald R. Ford School of Public Policy at the University of Michigan. My panelists today include Andrea Dunlop, who's the Managing Director of Payments for the Access Group, Chair of the Emergent Payments Association Advisory Board, and a member of the European Women and Payments Network. We have Tillman Urback, Managing Partner for Flourished Ventures, a formerly partner at Omidyar Network, where he built the Global Financial Inclusion Team, and the former CEO of Seagap, the consultative group to assist the poor. And we have Musa Etopa-Jimmo, Director of the Payment Systems Management Department for the Central Bank of Nigeria, an experienced leader in public and private sector issues in banking, in engineering, and in software. I'm really delighted to have all three of you today for this discussion on payment systems. For some people, payment systems may seem like a dry issue, but I think it's really actually not. It's one of the most exciting issues, I think, in finance today. And more importantly, it's a key to consumer autonomy, to access to the financial system. It's really the backbone of the system. And in many ways, it is helping us to find, in each society, who's in the system and who's not in the system, who is part of the financial system and who has denied access. It's really, really quite critical. And I'm thrilled that we have Andrea Tillman and Musa here to help us work through these issues. I might start with just a question for each of you. We're in the middle of a global pandemic. Many countries around the world use the payment system in their own countries to try and get government benefit payments to individuals affected by the pandemic. And I'm wondering what you've seen that has worked and what has not worked, and what does that tell us about the state of the payment systems in those countries that you want to talk about? And we don't have to be comprehensive, but just to get a look. And maybe I'll start Tillman with you, and then I'll ask Musa to answer and finally Andrea. Yeah, thank you, Michael and colleagues for having me today, great, great pleasure. Absolutely right. So a large number of governments around the world initiated relief programs, be it for families or for small businesses. The World Bank is putting together a paper I just saw. They mentioned some 80 efforts, distinct efforts, large scale efforts around the world. And I think it's fair to say that in those places where there was a modern public digital infrastructure and that includes payments, but it goes beyond payments to include identity, data availability, etc. It's fair to say that those countries who had that type of infrastructure could do a better job. So INIA, for example, in April in a time span of some 10 days, reached more than 100 million people at the margin of society in the informal economy. And they reached them with relief payments with a click of a button because INIA has the famous INIA stack public digital infrastructure, identity, payment switch, etc., we can talk more about that. Other places were not so lucky and the U.S. where I am right now and where I live, and I think the previous speaker in the conference actually alluded to that as well. I caught the tail end. In the U.S., it took three to three months for individual checks to go out. And some people are still waiting and we send checks to folks who had deceased and others that were not eligible. So yes, the infrastructure there was in place at the time has made a big difference in government ability to respond appropriately to the crisis. Thank you, Tillman. Moosa, you need to unmute. Can you hear me? Yes. Thank you very much for the question. For us in INIA, the government had actually embarked on several initiatives that leveraged this on the payment system. Before this time, before the COVID, there was this program that the government runs called the conditional cash transfer, where they pay monthly allowances to the poor. And what they basically leverage on is to use the mobile money to deliver those financial services. When the pandemic came, it was very obvious that the only means by which payment can actually be delivered to people was to use electronic means of payment, cash, nobody wanted to touch cash. As a matter of fact, nobody actually wanted to touch even physical payment devices. So everybody was doing transfer. And so one of the requirements that we needed to have for those in the rural communities or those that were badly affected was for them to have bank accounts. Unfortunately, the infrastructure for enrolling and getting everyone into the financial services is in that ability, which is why as a country, we embark on a financial inclusion strategy. We've been on this strategy for a long time, trying to see how we can get more than 80% of Nigerians into the banking sector. So the payment system basically provide the underlying framework through which economic agents can actually transact in Nigeria. Major use case during COVID was this palliative and the relief fund that was to be distributed to those that qualify to have that. Now, one of the major challenges that we face within the payment system in getting this thing sorted out was the issue of telecommunication infrastructure. People in rural communities do not have access, the kind of digital access we have within the cities. And so having a vast network of agent outlets and making sure that our payments and communication infrastructure is very cohesive and resilient is one of the major deterrent payment systems here. The other one is identity problem. Everyone in Nigeria needs to be uniquely identified so that we can actually be sure that when payments are being made, it is being sent to the right recipient. And so we embark on a national program of registering all Nigerians and issuing the national identity number. That is also one of the projects that we have also embarked on. By the time we resolve the issue of identity and solve some of the common infrastructure problem, I think Nigeria would be very strong in terms of making payment systems the underlying infrastructure for delivering financial services in Nigeria. Thank you, Musa. Andrea? Yeah, actually, I just wanted to touch on something Musa said because I whole heartedly agree with him, digital ID is absolutely key for inclusion. And actually, and not also the perception of this in emerging markets, actually, quite frankly, Michael, in our own markets in the US and UK, which we're considered very mature markets, it would help our markets significantly if digital ID was in place. But to go back to your question because I'm diverting and I don't want to waylay this whole conference, but we have quite a mature payments infrastructure in the UK. I think it's fair to say that there were a couple of issues that I think really come to mind that has occurred and still ongoing now during COVID. One was the ability for the businesses, particularly for businesses to gain access to the government loans, and I'm guessing it's no different probably in the US. That has been a challenging process for many businesses struggling to get access to the money. I think on the consumer side, I think that's been less of a case, but I think what COVID has highlighted to myself and many people in the payments industry is probably how many more vulnerable people that we had in the UK that we didn't fully appreciate. There's been a massive drive in many markets to a cashless society. When COVID hit, we have a significant amount of people that may have bank accounts, but withdraw cash and like to spend in cash for a number of reasons. We have a lot of vulnerable elderly people that were segregating and isolating at home. That proved challenging on actually how do they go out and get their food, pay for their bills. There were some interesting innovations that came off that. There were companion cards created by Starling Bank to give to other people that you could load funds on to, that those more vulnerable people could still enable other people to go and buy goods for. One of the aspects that's really challenging around all of this is it still comes back to people being literate around IT technology, understanding how to load these cards, how to manage these products online, and believe it or not, we still have a massive gap in the UK around this. We also have a digital gap and no dissimilar to Nigeria, I think we still have about 25, 23% something like that that struggled to get access to broadband here in the UK, which when you're in lockdown kind of compounds some of these challenges that we saw and made people that were already vulnerable, probably even more vulnerable through this process. I think there's a lot of lessons learned for us in the UK is how do we go forward with our payments infrastructure and our systems in the future and start to take into account all of society, not just a certain percentage of society, which I think is what's happened here in the UK unfortunately. Thanks Andrea, that's really helpful. We're going to dig a little deeper into the question of who ought to run the payment system, whether that's the private sector, the public sector, multiple private sector entities and the like. Maybe Musa, you could start us out. How does the central bank of Nigeria think about the question? What kinds of aspects of the payment system should be run by the central bank itself? What should be regulated by the central bank? How do you think about these questions? Well, for me, I think running the payment infrastructure should actually be private driven. It shouldn't be run by the central bank. It shouldn't be run by any regulatory authority. As a regulator, we're supposed to provide the guidelines, the directives, the environment that makes all the participants to try very well to work simultaneously. And so to be an arbiter, you then need to take your hand off running any specific payment infrastructure. And that's basically the kind of configuration we have in Nigeria. The central bank doesn't run any payment infrastructure aside the ROTGS, the real time gross settlement system. Apart from that, every other payment infrastructure is being run by banks and by private entities and fintechs. Central bank doesn't run, it's not an operator, it's a regulator. And that's the kind of configuration we have in Nigeria that makes competition very smooth and symbiotic. So Musa, Nigeria, the bank-to-bank network for real time settlement is run by the central bank of Nigeria, but all the other payments infrastructure is run by the private sector. Yes, the ROTGS is being run by central bank because that's where the net settlement ends up. The banks all connect to central bank to settle the obligations after transactions have been pledged. And so we maintain the ROTGS. Every other payment infrastructure is being operated by the operators, the banks, the payment service providers and the fintechs. And Musa, what's the competitive landscape for the private sector? Is there real competition for payment services or the different providers operating in different sectors of the payment system? Well, basically what we have done is to segment our payment system into different compartments. And so what we did is to, you know, get them different kinds of authorization. So for example, switching. Switching is very, very important because it connects all the banks together and all the other payments. We have specific license for entities who can switch and we give the guidelines of what those switching services can be provided. And so we also have some agent banking, you know, activities that are regulated. We also have card issuance and apparements that are written. So they're also segmented into different authorization categories. What the central bank basically does is to provide the framework in the framework that makes all this entity to connect and interoperate. And so I would say, lightly, it is private sector driven with the regulator on the mediating to make sure that there is proper conduct within the ecosystem. Thanks. Tillman, how do you think about these questions? I would probably take two lenses. And the first one is a bit first principles, if you will. I think you would want to think through a financial system and say what is underlying, what is public good in nature and probably should be government provided. And both Moussa and Andrea mentioned identity as a key element. And I would think in many countries that should be a public good. It is related to the civil registry, etc. Then comes the question of what is a utility in nature. I probably would argue that payments, in particular retail payments, have a utility characteristic. They have network externalities. So frankly, they might be natural monopolies. And then you can think about where should we have public sector, public good utility type characteristics and where do we want the private sector to compete. And I think an ideal system would be one where there is the lowest possible systems cost, no duplication, and where the private sector competes at the application layer. So that's my first lens, sort of a principle lens. And I'm an economist by training as you probably can hear from that answer. I would then pragmatically use a second lens, which is to say, what is there in the country already, what to build or nobody starts home scratch when it comes to these type of things. And when it comes to specifically retail payments or the payment utility, it could be run by a consortium, a nonprofit consortium of private sector players. It could be run by a public player. If it is run by the private sector, it should be probably regulated as a utility. Interoperability should be mandated, the type of things that Moussa already alluded to. And I suspect that the majority of countries actually have some such approach. And certainly the higher performing ones from a cost and real time settlement perspective. So when I looked at these things, the Netherlands, Canada in the highly advanced economies were all one as sort of consortium of private sector players under public regulation in emerging markets as conceivably a bigger role for government or even the central bank to run more of the operations because they have the capacity to do so. But the answer really depends on the country and its starting point. Thanks, Tillman. Andrea, how do you think about this question? Yes, I mean, you know, in UK and Europe, you know, I think we've been really fortunate with some of the regulation that's opened up the market and the aim of that regulation was to enable more efficient into the market. Because I guess, you know, to Tillman's point, there could be a monopoly aspect around how the market has operated previously. I think now with open banking and the rise of open banking, I really see some, you know, really exciting times ahead. And I think the benefit of this off the back of this is ultimately going to be for the consumer. So I think, you know, with the new technology that's come in with a lot of the fintechs, and also actually many of the banks as well, a lot of the banks have up their game with all the new regulation that's come in, that there's much consumer lens on payments products. So the whole experience that consumers have, you know, can be you know, much more customized than I think how we were operating previously in more of a card payment world. I think open banking opens up so much more possibilities. And I think this is really exciting for UK, Europe, Australia now, I think they went in January. You're seeing other markets embark on the same journey that we've all been on. So yeah, I think there are exciting times ahead in this space, but there's no lack of competition. You know, I think in the UK market or the European market, they're pretty thriving over here in this space. Andrea, for our listeners who don't know about the UK's open banking initiative, do you mind just describing the basic structure? It's different from what we have in the United States and in many other countries. Yeah, so basically, when you look at the original N2M model of card payments, you'd have the consumer, the issuer, the card schemes, the merchant acquirer, a gateway before you get to the end bank account. And the advantage of open banking is it rides on in the US ACA trails. You know, we would call it faster payments over here. And it really enables payment companies, payment initiation companies to initiate payments straight out of a consumer's bank account to pay the pay, the payee. It's a very simple process without all the layers in between. It removes a lot of the friction. So if you have a good example, be like an invoicing model, the payments can be embedded into the invoice, pull straight directly from your bank account, straight to the person you're trying to pay in. And it does it all in real time. The advantage for businesses that makes this really, really attractive is it can be instant liquidity to them. So they're getting paid quickly. And as we all know, many companies are really struggling on getting bills paid in a timely manner. That's a massive issue and has been for a long time. The instant payment. And then on top of that, actually, there isn't a lot of the level of charge back and fraud aspects that we see traditionally in card payments. So there's a lot of benefits to that from using these rails. And then the biggest benefit of all to businesses to merchants is really the cost. The cost is significantly lower for utilizing these rails, you know, are more, you know, mid to high value payments for lower payments, you can still say a card makes sense. But as the values start rising, open banking just makes much more sense for some of these. So I think we see a lot of disintermediation will come in the future around these rails, you know, definitely. Thanks, Andrea. Tillman, I know you've done a lot of thinking about the evolution of the payment system around the world over time. I'm wondering if you could help our audience understand or give a perspective on that evolution. Where have we been and where do you think we're going in payment systems? Yeah, you know, I think one observation that might resonate with all of you is the following. At some level, technology, new technologies, when they arrive, they hit a system in a market structure, an industry structure in its current form. And we have seen massive explosion of innovation. And it really, from maybe relevant for today's discussion on the payment, retail payment side, started with a 2G feature phone. And PESA famously in East Africa, because the 2G feature phone had this unutilized channel for unstructured data, the USSD channel, and folks realized, well, we can transfer value over that. And that took off because there was relative white spray, white space and the regulator in Kenya was willing to let that experimentation happen. Now, that was held by the fact that Safari.com as the telco operator had a dominant market share. So there was no interoperability issue. It kept prices higher. In neighboring Tanzania, there are four operators. And when interoperability kicked in, right, fees for consumers or for senders and receivers became much lower. Then came the 3G and smartphone revolution, if you will. And it was really picked up in particular by the Chinese ecosystems. They used the new technology, but they still built a walled garden on financial Alipay on one side with a billion users by now, WeChat on the other side. It's a duopoly, if you will. And there's a real opportunity now to leapfrog all of that and put these principles in place that we discussed earlier. If there is an interoperable architecture from a payment system perspective, and if there is open data from an access to data perspective that I mentioned that Andrea covered, a modern payment in modern system can be faster, cheaper, less risky for everybody. And emerging markets have a real chance to leapfrog into that. In the U.S., we are stuck for much of our day-to-day payments with the old card networks and card-based news. And that cost for the credit card still 2.2% or some such thing on average, and for the debit card 1.2% on average of transaction. The cost could be much, much, much lower than that. And India and others are proving that where the cost for transaction is cents on the $1,000 as opposed to percents, as we observe it still in many other places. Excellent point, Tillman. Moose, as you see this competitive landscape in Nigeria develop, how did the central bank go about thinking about whether to regulate non-banks and how to regulate non-banks in that space? Yeah, I think regulating entities within the payment system have always been a major concern for all regulators. And in our own case, the inclusion of the faintings into the payment space actually pulls the great challenge for central bank. We're trying to balance allowing innovation to thrive and managing the risk that these innovators bring to bear. And so the approach that we have taken is to allow innovation to come out first, and then we try to put the brakes in between by putting regulations guidelines on what to do. And so some of the actions that we have taken recently, basically to promote fainting, was to launch the regulatory sandbox, in which case we allow the faintings to come and play around with the ideas and see whether they work in order to drive the financial inclusion in the country and not to facilitate payment services. So that is one of the actions that we have taken. Just like Andrea said, in Nigeria, we are also pursuing the concept of open banking, where in our own case, we've actually ramped up on instant payment. Instant payment is not something new in Nigeria. It actually happens instantly. Now what we're trying to do now is to allow the new entities, the small companies, the financial technology companies that are coming up, to also now participate by playing the middleman role. And so that's why we are also trying to drive open banking concepts and all that. But beyond that, we have a regime in Nigeria where our payment system directives and guidelines usually don't just have one within the central banks. What we do is to have an ecosystem, a reinforcement ecosystem discussion, and find out what exactly works for Nigeria. Payment system is very passive, is worldwide. But what we try to do is to dominate and find out what happens and what works for Nigeria. And that's why in coming out with our regulations, we always invite and involve all the major stakeholders, including other regulatory agencies. For example, agencies that regulate the telecommunication industry, agencies that ensure the depositors fund in the bank, they are all brought together for us to reason and find out the balances between all these regulatory agencies and come up with a policy that makes the financial system, you know, works. So for us, we allow innovation to come up, and then we follow it up with regulation that makes market conduct very good. Thanks, Moussa. That's really helpful. Andrea, how are the Europeans thinking about this question of the regulatory perimeter for payments? What's covered by the regulatory infrastructure? What's left out? Have people tried sandbox approaches like the one that Moussa is describing in Nigeria? What do you think has been successful and not successful in that space in Europe? Yes. I mean, we also have a sandbox, and I think it's been very successful. I think we're really fortunate in our market that we've got quite a progressive regulator. That's really helped the non-bank market really develop really well. I'm not saying we're not without our challenges, but what I do think has happened probably in the last five years is the regulatory approach has really changed. So it's not just the supervisory style, it's a much more open and engaged regulator that works with companies around supervision and has a very much more of a consultive approach to the non-bank sector. So, I mean, there'll always be issues because inherently you can't open up the sector and there won't be unintended consequences. Of course, there are. But I think what's great is that our regulator actually does work with us. And I think that's the case pretty much across most of the countries in Europe, which is why I think it's been pretty much thriving across Europe in this state, the non-banks. But what I would say as well though is that I think the non-banks that have come in and added particular specialism and very niche products within financial services, I do think that has upped the game for the banks. And I personally feel in the probably last 18 months, I think the banks have moved much strongly more forward with much more of a consumer-led approach, which I think historically have been lacking. So I think there's been a benefit on both sides. We all partner with the banks and I run a regulated entity myself. You partner with the banks and you collaborate with them. But equally, I think there's benefits on both sides as to the different types of services that we bring. It's much more complementary. There may be people think. Thanks, Andrea. Tillman, I wanted to return to one of the issues you posed about competition. If we have network externalities and payment systems and they tend towards a natural monopoly, what are the kind of minimum requirements necessary to have a functioning payment system with real meaningful competition for providing payment services? Yeah. I mean, the starting point is the one that you are describing, which is there are network externalities. If I can easily pay somebody else and there are more folks out there, there's a utility coming to that. And frankly, that phenomenon is accelerated now with the situation that we are living in. COVID and economic lockdown is changing the ways we try to make a living, the way we shop, the way we socialize, we do conferences like this online. And so new platforms that are important in our lives are gaining relevance. And that's why regulators are struggling with this notion of how to deal with these new platforms, for example. And by the way, I have a great sympathy for regulators. Regulators are concerned about the stability of the system, the integrity of the system. They want to protect consumers and they want an inclusive system and they have to balance all these type of things. And when it comes to payment systems, I would go back to the first principle of saying they ought to be interoperable. They ought to be real time. It should be push any account to any account. So you should probably regulate by, well, designed by these principles and then regulate activities, like to like activities as opposed to different institutions being regulated differently because of the legal status. I realize I remain a bit at the sort of abstract level, but I do think that's your starting point. And then each country and each regulator has to think through what does that mean for our context. And then the private sector can build on that. Once there is certainty around these things, the private sector will come in and will figure out better solutions that ultimately benefit all people. Our regulatory setup, though, does need a refresh, right? A lot of these things in mature countries like the US were written in the 90s, often in reaction to crises before the iPhone was invented. And so they just don't take into account these new opportunities and possibilities that we have and the new risks that also have a reason. So we do need a refresh there. Thanks, Tillman. I have one or two additional questions for the panel. And then in a moment, I'm going to turn to the audience questions. Musa, you touched on this very briefly in your opening remark, but I wonder if you could say a little bit more about how you think about the last mile problem, that last moment between the payment system and a merchant or between peers and peers. Is there a merchant access problem that you have found or have you figured out how to solve? Are there last mile issues that you've had to overcome in Nigeria that would be helpful for others to hear about? Yeah. It's something that is still ongoing, quite ongoing. There are several approaches to it, from regulator and then from the operator, including even the government support to resolving those last mile problems. Now, one of the ways by which we are approaching this is to deploy massive agent outlets to make sure that we keep the financial watchpoints closer to the underbank and then on the south and all that. Now, how do we get this done? We can't run a payment system without very efficient telecommunication infrastructure. That is very important. That's the way we get connected to the internet or at least connected onto the network. So what we've done as a regulator was to come up with a licensed regime that allows telecommunication companies in Nigeria to take a kind of authorization calls to our agent where they can actually deploy and leverage on the existing footprint that they have in rural communities to provide financial watchpoints. So they could actually turn their customer outlets wherever they already have signals, masks and all that. They could actually convert them to financial watchpoints. And so we are approaching it to make sure that we have provided access to the new Sanctanese of Nigeria. On the other hand, building agent outlets is also very expensive, especially when you move towards rural communities because you need to solve the problem of power. You need to solve the problem of security and all of that. And so it becomes very expensive to actually deploy agent outlets in those new Sanctanese. And so what with the central bank and the committee of banks called the Bankers Committee have done was to provide a pool of funds that these agents and super agents can actually use to build these agent outlets at a very cheap cost. So we also support the super agents with financial support so that they can go into the hinterland and build the agent outlets. So why the telecommunication companies are building networks, lean fibres and providing access across the country? The central bank and the bankers committees are providing funds that they needed to build these merchant outlets, cash in cash out outlets in the rural communities. That's basically what we're trying to do. I'm hoping that by the end of this year we are targeting to have a well over half a million agent outlets in Nigeria that will enable the underband to have financial support. And Musa, are you providing direct cash liquidity to the super agents or is that through the banks? No, through the banks. Each super agent will apply through its banks to access that fund. Great. Let me turn to some audience questions and then I'll have a few final questions at the end. Andrea, let me ask you, there's a question from the audience. The progress of fintech companies is often constrained by their need to partner with a bank that has access to central bank payment systems. Should central banks expand payment access to fintech companies? So it is true. Many fintechs are constrained by this and do need to use banking partners, but a couple of years ago in the UK between the regulator and the Bank of England, we did actually open up access to central banks. So we have a number of fintechs now that are connected into the Bank of England and carry out direct clearing. And I think that has started to have a really good impact in the UK on the services that can be offered outside of the core main banks. What I would say is that I think that this isn't necessarily an easy step for a central bank to take. I think that for central banks to start to open up to fintechs, to a wider system, could open up some additional risks that maybe weren't considered in the beginning. So I think this is a challenge for central banks and the future for them is just looking at how do they move forward? How do they move with the expectations of the market? How do they keep pace with technology when they're trying to maintain a very stable system supporting our core infrastructure? So I think this is a really tough one for them. And in the UK, you're probably aware of this anyway, we are going through a programme of work to upgrade our real-time system so that actually it's fit for tomorrow. But this isn't something that can be done overnight. And I think this is the challenges that fintechs expect everything to happen tomorrow and are terribly impatient. And when you embark on a programme with someone like the Bank of England to be on boarded into the central bank, this isn't a two-week project, it's not a couple of agile sprints and you're in, there's a lengthy process. So you're probably looking at probably a 12-month process, it could even be more, but with the bank on the verge of this massive technology uplift to provide services for the future, I do think there'll probably be a knock on impact to fintechs in the UK while we go through this transition. So we've got the first few in, which is great and we can see what the future can start to look like, but we've still got a way to go to get our national infrastructure where we need it to, to really adapt to the future. And I guess that's the challenge for central banks all around the world right now is how do they open up, how do they develop their tech and future proof it for the future, and then how do they manage the additional risks of bringing these players in through the central infrastructure? Thanks Andrea. Tillman, maybe you could take this one, there's a question from the audience, why is improving cross-border payments such a difficult problem? Are the challenges primarily technical, legal, or financial? If you look at different corridors, remittances corridors, cross-border, again I'm on the retail side of things, things have changed quite dramatically, right? So if you have environments where in both country A and country B there's clarity around, you know, your customer requirements, if everybody has essentially a digital access, either via account or wallet, etc, then cross-border transfers can be very easy, relatively cheap, and fast, and this is happening, and you don't need blockchain and bitcoin or any some such thing for that, right? You just need to modernize the age-old system that is in place, and for busy corridors that has happened. My sense is this will accelerate quite rapidly. The big cost in domestic, international remittances is still cash in, cash out, right? You need somebody to take the money in, and then the last mile, somebody needs to be able to take it out, Musa spoke about that. As countries on both sides do away with that need, because the entire retail payment system digitizes, there could also be an easy way to connect, as long as there's reciprocity in regulation and approaches. This is happening, and will happen, and will accelerate. Tilman, do you think that the evolution of that system will disintermediate the correspondent banking system, or use that system? It will, it's a bit speculative, obviously. It will certainly take out a couple of layers, I mean, if you go all the way back, how did this start? It started hundreds of years ago when you needed trusted intermediate banks, and you were merchant in Italy, and you had your merchant banker who connected you, and who had some connections to New York, and that banker in New York had some connections to pick your place. There was this layer of correspondent banks, because they needed to create the trust that trade could happen, what have you, right? It was a trust-based system that required this type of correspondent banking layers. You can take out a lot of that when things are real-time, digital, and settlement is happening pretty much instantaneously, right? There's less trust needed, if you will, there's no settlement risk. It will become cheaper for everybody, and yes, we can take out intermediate layers. Moosa, this question might be to you. How should central bankers think about the scope of a regulatory sandbox? Are all financial activities appropriate for a sandbox? If they're limited enough, and the number of people that they reach? That's the audience question. Well, this is a very tricky one. I think we can have one answer to all the various implementations by the various central banks. The objective of the regulatory sandbox physically is to encourage innovation, and those innovations should meet economic needs and all that. So I think the limits to what can be played out within the regulatory sandbox depends on the economic objective that the central bank or the government is trying to solve, or the kind of innovation that they are looking for. In our own case, for example, financial inclusion is very dear to our hearts. We'll see how we can lower the industry cost to start. So we're looking at creative solutions that can actually lower housing of savings. We're looking at creative solutions that can be used to provide services to areas where you don't have strong connectivity. So offline payment, for example, is something that we welcome as an innovation to be played within regulatory sandbox. So as a central bank, what we've done is to limit the qualification criteria to objective that actually meets the economic need of Nigeria, the one that promotes innovation, areas that have not been touched. Those are the kind of things and boundaries that are set, including the fact that since we're going to run this in cohort, we can only take as much as our capacity can take. So we can basically take on everyone that applies anytime we open a cohort. But basically, I think the limiting factor should be the underlying objective of it is starting the economic need or solving any particular problem that the country is faced with. Thanks, Musa. That's really helpful. And I do think that there's so much nuance that's needed depending on the particular government structure and private sector structure in each country that's absolutely critical to sorting through what makes sense in that context. The next question from the audience is, what role should central banks play in promoting the advancement of open banking? And maybe I'll ask Tillman and Andrea, maybe Tillman, if you could talk a little bit about the India stack experience. And Andrea, you could talk a little bit about the UK experience. That'll give the audience a flavor for different approaches to this problem. So the India stack and the language comes from the technology world. The India stack really, at its basis, has the unique identity, biometric, unique identity, 10-finger prints, two iris scans. And that, as we discussed earlier, is a public good the government provided it. Then very importantly, financial regulators obviously had to make sure that the use of this identity, it's called ARDA, that that actually is permissible or is good enough, if you will, for KYC and other purposes. If the financial regulators didn't recognize ARDA as sufficient, then it would not work. So that's the second element of the stack, if you will, is an entire notion of regulations around the use of the identity, including for consent and doing away with a requirement for wet signatures, these type of things. These are all the little things that can take inefficiencies out of the system. And then on top of that, there is the payment layer. And we talked about that a bit. It's the National Payment Corporation of India, which is jointly owned by a dozen plus banks in the country. And the central bank is the Reserve Bank of India is very much part of these deliberations. And it essentially nudged the system towards adopting an open architecture type approach to payments. And that led to this ability of any account to any account. There was an insistence that at the beginning of a transaction and at the receiving end ought to be a regulated account that is properly KYC, etc. But all sorts of efforts were made to make that easier. And the notion of then the data layer, who owns what data is a consumer or is a small business, to whom can you provide access as far as your data is concerned, that's a next important element. I think the data layer is actually something that we often forget, in particular in the emerging market context. There's at least a billion consumers who don't have a FICO score or any such equivalent. The vast majority of small businesses operate in emerging markets, operate under some notion or to some degree of informality. But the underlying lies are digitizing either in the supply chain or in the distribution chain. So there's more and more data available that allows, for example, for credit underwriting that banks traditionally could not have done. So the data layer and driving accessibility and giving users control over their data, that's a very, very important piece to unlock the economic upside. And that can be done by the regulator, but it can also done by private sector initiatives around API infrastructures and the voluntary, if you will, cooperation. If everybody realizes, wow, the pie could become bigger if we all open up, then there is a win-win situation conceivably. Tillman, that's right. I wonder whether, I haven't looked at the economics of this, but whether the, if you really do an open API, is the pie, the pie is bigger for society, but is it bigger for the incumbents is a different question. That is true. Somebody's efficiency gain is somebody else's revenue loss. And that's why we need the nudge. And as society and as regulators, I see Musa smiling, we should absolutely give that nudge. I mean, I had one piece in for the US, Michael, that people might not know. So I mentioned earlier that the average credit card transaction costs 2.2%. Relatively little goes to the networks. Most goes to the issuing banks 2%. And then the issuing bank credit card gives half of us, half of that 2% back to all of us in forms of cash back or it used to be my as we remember those days. Debit card or transaction cost 1.2%, cash obviously has no cost for the merchant or less cost for the merchant. Merchants don't discriminate anymore. They used to, right? You used to go to a gas station and get a better price if you use cash, that's gone. Everybody pays the same price, which de facto means that relatively lower income households, because they disproportionately use cash or debit card actually subsidize my credit card rewards. That's just not okay. The Federal Reserve Bank in Boston has estimated the value of that annual subsidy, if you will. It runs in the thousands of dollars per family in the US. Excellent point, Tillman. We're getting close to the hour. Let me let Andrea, if you want to say more about, you talked a little bit about UK Open Banking before. Are there other aspects that you want to highlight in terms of the central bank's role in pushing that? The only thing I would add to that is that actually we, ours was a little bit more government led, so I think to Tillman's point, there needs to be I think a mandate from the top to really open this up amongst the big banks. Interestingly, we created a separate entity which is called the OBIE, which has really led Open Banking for the last few years, and they're actually overseen by the competition's market authority. I don't know if that structure is occurring anywhere else in the world, but I find that quite an interesting structure that we chose to go down that path rather than putting it directly under a regulator. Everyone is very engaged. The regulators are obviously part of the discussion and everything else, but it is interesting that it is the CMA that really oversees this. I think that's about ensuring that we're driving that competition in the market and ensuring that actually Open Banking actually stands a chance of being a success here in the UK. Musa, you were, as Tillman said, smiling before about the nudge. How much of a nudge did you need to give to the Nigerian private sector to move forward on issues like interoperability and Open Banking? Well, I think for us, just like I said, the payment system here is driven by the private sector. What we're trying to do is to create an environment where it is a win-win, and so we are working towards establishing, as we speak, we basically, to some degree, regulate or put a cap on pricing simply because we have a financial inclusion agenda. So we try to put a sale on how much you can charge the consumers, because truly we are promoting financial inclusion of which one of the major deterrents is high cost of financial services. Then we need to put a sale on that. But we're trying to promote interchange. And with interchange, it means if we just basically, the acquire and issuers trying to promote efficiency in the payment system. And so what the merchant actually charges the customer, or sorry, what the merchant charges the customer or what the acquire charges the merchant has nothing to do with regulation. It is not priced, it is not fixed. It is basically through the bargaining power. And by that, I think investors will actually see the opportunity to get a very high return on their investment. Because competition will basically drive price down. And with improved services, you get more numbers into the system. So for us, it's going to be an open market where we allow the private sector institutions to basically determine what price is good for their system and to also drive for the services that they provide. Thank you. I might ask each of you to say if you had to pick one game changer, a technological development or a policy framework that's a real game changer in terms of advancing financial inclusion through the payment system, what would it be? And maybe I'll start with Andrea and then Musa and Tillman. Oh, do you mean a current one or a future one? Either way, something that you think is right on the cusp of making a big difference or one that you anticipate in the future would be a game changer. Yeah, I mean, the game changer for me is digital ID, 100%. That's the game changer for financial inclusion. I'm afraid for all of our countries. Thanks, Andrea. Musa? I think it goes for everyone. Feminine digital identity is very key. Trying to know every single individual and using that as an authorization is very key. And that's the major challenge that we face now. So a major policy directive focuses on digital identification in Nigeria. That's great. Tillman? It probably depends very much on the country. In the US right now, I think we could make a big difference on the retail payment side. If we just made sure the underlying infrastructure was open 24, 7, 365, which is not the case for the Fedwire. We could also mandate immediate funds availability so people don't have to wait. So there's statutory authority in the US to make a real difference. Very pragmatic, immediately doable. If you step back at the systemic level, I very much sympathize with Andrea's point around digital identity as a foundational element. And I think the one thing that we do have to all wrestle with is this phenomenon of finance starting with payments, but quickly going to the other dimensions of finance on the retail side, being embedded in the big tech platforms. They have the customers. They have the data. They have the brand. They have the connectivity by definition. India just allowed WhatsApp to start embed payments into the app. 400 million Indians use it on a daily basis. That could take off very, very quickly. And it raises all sorts of promises on the inclusion side and it raises all sorts of new issues on the competition new risk side. And so we have to wrestle with them. Thanks, Tillman. We are going to have a discussion later today and tomorrow around the role of Facebook and Libra and the big tech platforms. As part of our conversations, I think it raises critically interesting questions. We are basically at the hour. Let me just thank each of you for your insightful contributions to our discussion and really learned a lot from our conversation. I know our audience did as well. Our audience, thank you for joining us. If we didn't get to your particular question today, hopefully you'll hear more about it throughout the course of the conference. So those of you who are watching, please join me in thanking my wonderful panel. Thank you. Take care, everybody.