In a real-time credit-push system, it can be assumed that the sending participant is responsible for the sending end-party having the funds necessary for the transaction: this does not need to be specified in the rules. The rules do need to address at what point the transaction is irrevocable from the sending participant’s perspective (See Participant Responsibilities – Responsibilities as a Sending Participant).
Some “debit pull” card payment schemes establish a mechanism for the paying bank to reverse a transaction after it has occurred, most typically because of a claim of fraud by the paying end-party. This is not typical in emerging “credit-push” real-time systems: in those systems, a paying party exposed to fraud by the receiving party would turn to the courts, rather than the payment system, to resolve the issue. If a scheme decides to implement this type of provision, the operating rules must be very precise about the types of transactions this applies to and the process by which the reversal works. Schemes should consider that there are considerable costs to implementing this kind of provision (See Visa: Section 1.11.1).
Participants in any payment scheme need to manage risks related to possible fraudulent use of the system. At a minimum, participants need to follow regulations including KYC (know your customer) and AML (anti money laundering) requirements of their government: there may be need for additional risk management for internal purposes. Operating rules of the payment scheme may specify requirements for participants in this regard. Note: The Level One Project Guide prefers a model in which the scheme “switch,” or another provider chosen for this purpose, handles much of the risk management on behalf of the participants. In this event, detailed operating rules would need to be created to specify how participants must or can use these services.
The Financial Inclusion Perspective
Good risk management facilitates a system that allows non-traditional providers to serve as participants, which helps drive innovation and access. It also supports a positive, trustworthy experience for first time end users. For example, allowing transactions to be reversed through the payments system after-the-fact is costly to administer and will make the system less trustworthy by consumers as an alternative to cash.