Nonbanks and Risk in Retail Payments: EU and US

Abstract

This paper documents the importance of nonbanks in retail payments in the United States and in 15 European countries and analyses the implications of the importance and multiple roles played by nonbanks on retail payment risks. Nonbanks play multiple roles along the entire payment processing chain. They are prominent in the United States and their presence is high and growing in Europe as well, although there are differences among the various countries and payments classes. Nonbanks' presence has shifted the locus of risks in retail payments towards greater relevance of operational and fraud risk. The paper reviews the main safeguards in place, and concludes that there may be a need to reconsider some of them in view of the growing role of nonbanks and of the global reach of risks in the electronic era.