To take this further and fully realise the benefits, cross-border coordination will be key to promote uniformity in how the standards are interpreted and operationalised. Promoting competition The fourth perspective for the regulatory agenda relates to the need to promote efficiency and innovation through greater competition. Given the importance of scale and network effects in delivering payment services, it is no surprise that the payments industry tends towards an oligopolistic structure. These market dynamics are amplified in the digital payments market. ‘Winner-takes-all’ dynamics are synonymous with digital platforms, which often aim to build as large of a network as possible. After all, this facilitates a virtuous cycle of more data, leading to better and cheaper services, which in turn leads to more customers – so on and so forth. To this end, regulators must ensure that these market dynamics do not result in perverse outcomes for the payments ecosystem as a whole. Such perverse outcomes could include the abuse of a dominant market position to erect undue barriers to entry, or to impose exorbitant prices on end-users. Encouragingly, regulatory authorities are increasingly playing an active role in mitigating such risks. Of significance are efforts to promote open access regimes to key payment infrastructures, regardless of whether the payment service provider is an incumbent bank or a non-bank player. In Hong Kong, the Faster Payments System (FPS) was launched in September 2018 with a total of 21 banks and 10 non-bank e-money issuers participating in the scheme.

To that end, regulations must seek to ensure that payment systems are secure, reliable and resilient. Given the increasingly unpredictable sources of risk, regulatory initiatives would benefit from an ‘assumed-breach’ philosophy. Systemically important payment systems must be set up to be able to withstand disruption. This would entail requiring adequate financial buffers and robust business continuity arrangements to preserve the continuity of key payment services under stressed conditions. With increasing digitalisation, cybersecurity incidences have the potential to not only cause significant business disruptions and monetary losses, but also undermine the trust and confidence in the global financial system. Due to the interconnectedness of the global economy, cyber resilience is only as good as the strength of the weakest link. It is important therefore for regulators to formulate and promote the adoption of holistic cybersecurity strategies that are constantly enhanced. This should be complemented by strong public-private collaboration at both domestic and international level to strengthen collective resilience. With payment systems becoming more efficient and interconnected, it is also important to prevent their abuse by illicit actors, such as for money-laundering and terrorism financing (ML/TF). Notably, the availability of instant payments poses challenges to traditional AML monitoring tools that operate on a batch mode, rather than on a real-time basis. Regulations should thus focus on continuous enhancement of AML controls among industry players, supported by improved AML compliance procedures and more advanced monitoring approaches.