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Public Policy Objectives and the Next Generation of CPA Systems: An Analytical Framework

Author

Listed:
  • James Chapman
  • Jonathan Chiu
  • Sajjad Jafri
  • Héctor Pérez Saiz

Abstract

The payments landscape in Canada is rapidly changing and will continue to evolve, fuelled by strong and persistent drivers. In Canada, the Canadian Payments Association (CPA) is on a path to modernize Canada’s core payment systems. This paper contributes to the discussion in three ways. First, it translates the government’s public policy objectives (PPOs) for the broad payments ecosystem into desired outcomes for CPA payment systems. Second, it develops a taxonomy for clearly describing the defining attributes of a payment system. These defining attributes are access, functionality, interoperability, timeliness of payments and risk management. Finally, we develop an analytic framework to consider the trade-offs of the various attributes to achieve the PPOs for the Canadian payments ecosystem. A key output of these contributions includes a possibilities frontier that represents the set of systems with designs that best achieve the PPOs, subject to regulatory and technological constraints. Based on the results of this exercise, we recommend the most critical issues for the CPA to investigate as it considers the modernization of its systems.

Suggested Citation

  • James Chapman & Jonathan Chiu & Sajjad Jafri & Héctor Pérez Saiz, 2015. "Public Policy Objectives and the Next Generation of CPA Systems: An Analytical Framework," Discussion Papers 15-6, Bank of Canada.
    • Handle: RePEc:bca:bocadp:15-6
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    References listed on IDEAS

    as
    1. Berger, Allen N & Hancock, Diana & Marquardt, Jeffrey C, 1996. "A Framework for Analyzing Efficiency, Risks, Costs, and Innovations in the Payments System," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 696-732, November.
    2. Gorton, Gary B., 2010. "Slapped by the Invisible Hand: The Panic of 2007," OUP Catalogue, Oxford University Press, number 9780199734153.
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    Cited by:

    1. Héctor Pérez Saiz & Gabriel Xerri, 2016. "Credit Risk and Collateral Demand in a Retail Payment System," Discussion Papers 16-16, Bank of Canada.
    2. Irving Fisher Committee, 2024. "Granular data: new horizons and challenges," IFC Bulletins, Bank for International Settlements, number 61.
    3. Ajit Desai & Jacob Sharples & Anneke Kosse, 2024. "Finding a needle in a haystack: a machine learning framework for anomaly detection in payment systems," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Granular data: new horizons and challenges, volume 61, Bank for International Settlements.
    4. Anneke Kosse & Zhentong Lu & Gabriel Xerri, 2020. "An Economic Perspective on Payments Migration," Staff Working Papers 20-24, Bank of Canada.
    5. Francisco Rivadeneyra & Nellie Zhang, 2022. "Payment Coordination and Liquidity Efficiency in the New Canadian Wholesale Payments System," Discussion Papers 2022-3, Bank of Canada.

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    More about this item

    Keywords

    Economic models; Financial services; Financial system regulation and policies; Payment clearing and settlement systems;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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