Upload
dirk
View
37
Download
2
Tags:
Embed Size (px)
DESCRIPTION
Enhancing competition and reducing costs in the remittance markets: A Matter of Principles. Massimo Cirasino Head Payment Systems Development Group The World Bank Ottawa, November 19, 2008. - PowerPoint PPT Presentation
Citation preview
Enhancing competition and
reducing costs in the remittance
markets: A Matter of Principles
Massimo CirasinoHeadPayment Systems Development GroupThe World BankOttawa, November 19, 2008
Overcoming Shortfalls: The World Bank Role in the Transformation Process in Payment,
Remittances and Securities Settlement Systems
2
World Bank Payment Systems Development Group
KnowledgeDissemination
Researchand New
Developments
CentralBanks and
SCs
MajorStakeholders
Multilateralsand
Standard-setters
DevelopRegionalInitiatives
PaymentSystems
DevelopmentGroup
KnowledgeDissemination
Researchand New
Developments
CentralBanks and
SCs
MajorStakeholders
Multilateralsand
Standard-setters
DevelopRegionalInitiatives
PaymentSystems
DevelopmentGroup
•The Payment System Development Group is at the center of an international network, whose main objective is supporting countries to reform Payments, Remittances and Securities Settlement Systems
Arab Payments InitiativeWestern Hemisphere ForumCIS Payments Initiative, SADC, others under preparation
G-10 andnon G-10CentralBanks andSecurities Commissions
CPSS, IMF, IFC, IOSCO, Regional Development Banks, other multilaterals
SWIFT, card networks, CLS Bank, commercial banks, other financial institutions, payment system operators, vendors, at the global and domestic levels
World Bank Payments Weeks, SIBOS, Regional events, International Conferences
Economic research on broad range of payment system issues (also remittance payments), new technologies (mobile payments)
Financing: WB loans-grants, fee-based and other TA, Regional Initiatives, FSAPs, support to FIRST-funded Initiatives, Others
Stocktaking &Policy Advice
Implementation Support
•Vision & Strategy•Legal Framework•Large-Value Systems•Retail Payment Systems•Government Payments•Remittances•Securities Settlement•Oversight & Cooperation
Help develop sound and efficient payment, remittance and SS systems, to:
1. Strenghten Financial Stability2. Support Access to Finance
4
PSDG Role
Keep role at center of international network
PSDG: Strategic Focus
Assist in all areas of payment system
developmentPivotal role in efforts to reduce cost of remittances
• 110 countries supported
• Growing focus on retail payment system issuesCPSS-WB GPs
Remittance price database
Continue workingwith all WBG Regions
• Demand-based• Other prioritization (e.g. crises)
Leverage resources and capacity
Total Potential Payment VolumeTotal Payment Volume
$-
$500
$160,000
Remittances Payment Systems
Bil
lio
ns
2006 Emerging Market GDP = $11,527 BN
$155,000
$64,845
$89,351
$154,196
$222
$240
$462
Notes: (i) Preliminary Figures. (ii) Estimates for Remittances based on IDB figures. (iii) Preliminary estimates on Payments Systems based on 2007 World Bank Global Payments Systems Survey. Estimates for retail payments systems only. Does not include value of Real Time Gross Settlements transactions.
Least efficient system Most efficient system
Total potential reduction in costs
$0
$5
$10
$15
$20
$25
Remittances Domestic PaymentsC
os
t p
er
$1
00
se
nt
75%
90%
Appropriate Infrastructure helps reducetransaction
costs
Notes: “Total potential reduction in costs” is indicative of the broad range of potential cost reduction. Actual cost savings realized is contingent ultimately on the efficiency of the system. For remittances, costs are of sending remittances to remitter’s home country. For domestic payments, costs are sending payments within a country.
Payment volumes and cost savings for Remittances & Payment Systems
Implementing the BIS-World Bank General Principles on International Remittance
Services
7
Lower costs, better performance, safer transfers
Single country implementation with authorities and stakeholders
Regional initiatives with regional partnersGlobal Public/Private Partnership
Coordination group to develop implementation guidelines and monitor implementation
Development of the General Principles
Request from the International Community
•The General Principles are a multilateral effort to address a global challenge
The World Bank PSDG and the Bank for International Settlements CPSS chaired the Task Force that developed the Principles.
Chairs:
World Bank PSDG and CPSS
Members:
AMF, ADB, Central Banks of Brazil, Europe, Germany, Italy, Mexico, Philippines, Sri Lanka, Turkey, EBRD, HKMA, IADB, IMF, Fed Board of Governors, Fed of New York, World Bank
Secretariat:
World Bank PSDG, CPSS, DFID
Typically by migrant workers to their families. Especially from developed to developing countries
Person-to person, low value - ie not commercial or wholesale payments
Domestic remittances also exist
Recurrent - but typically made by individual transfers (eg not by standing order)
Typically credit transfers
For remittance service providers (RSPs), often indistinguishable from any other retail cross-border transfers
An international remittance is a cross-border, person-to-person payment of relatively low value
Issues with remittances:
Usually expensive Sometimes slow Sometimes inconvenient Occasionally unreliable
Focus here is on payment system aspects (not developmental, immigration, balance-of-payments or other aspects)
GP1: The market for remittances should be transparent and have adequate consumer protection
GP2: Improvements to payment system infrastructure that have the potential to increase the efficiency of remittance services should be encouraged
GP3: Remittance services should be supported by a sound, predictable, non-discriminatory and proportionate legal and regulatory framework
GP4: Competitive market conditions, including appropriate access to domestic payments infrastructures, should be fostered in the remittance service industry
GP5: Remittance services should be supported by appropriate governance and risk management practices
Who should take action?Many people may need to take action. But Remittance Service Providers and the authorities have particularly important roles:
Remittance Service
Providers
Public Authorities
should participate actively in the application of the general principlesshould evaluate what action to take to achieve the public policy objectives through implementation of the general principles
Direct provision?
Less interventionist More interventionist
Monitoring? Dialogue?
Monitoring and
outreach?
Catalyst/facilitator? Regulation?
• Form of action by authorities?
The General Principles have been formally endorsed by the G-8, G-20 and the Financial Stability Forum
Both Sending and Receiving Countries have been urged to adopt them!!!
Lower costs, better performance, safer transfers
Single country implementation with authorities and stakeholders
Regional initiatives with regional partnersGlobal Public/Private Partnership
Coordination group to develop implementation guidelines and monitor implementation
Development of the General Principles
Request from the International Community
•The General Principles are a multilateral effort to address a global challenge
The World Bank PSDG is chairing a Coordination Group that developed Guidelines for the application of the General Principles and stocktaking methodology
Membership:
ADB, AMF, CEMLA, CGAP, DFID, EBRD, IADB, IMF, UNDP, US Treasury, USAID, World Bank
Lower costs, better performance, safer transfers
Single country implementation with authorities and stakeholders
Regional initiatives with regional partnersGlobal Private-Public Sector Partnership
Coordination group to develop implementation guidelines and monitor implementation
Development of the General Principles
Request from the International Community
Remittances: the BIS-WB General Principles for International remittance service are a multilateral effort to address a global challenge
Assessments:
El Salvador (September 2006)Morocco (November 2006)Honduras (April 2007)Haiti (September 2007)Nigeria (February, 2008)Uganda (April 2008)Guatemala (April 2008)Czech Republic (May 2008)U.A.E (January 2009)
15
Improvements in the remittance market are achievable, when international and national authorities work with the private sector to achieve the goals of the Principles.
The pilots undertaken so far have led to remittance market improvements, and the assessments developed are a good tool to provide recommendations and promote cooperation between authorities.
The World Bank will continue to lead teams in implementing the principles (with an increased focus on Africa and South Asia within regional initiatives going forward)
Lower costs, better performance, safer transfers
Single country implementation with authorities and stakeholders
Regional initiatives with regional partnersGlobal Private-Public Sector Partnership
Coordination group to develop implementation guidelines and monitor implementation
Development of the General Principles
Request from the International Community
Remittances: the BIS-WB General Principles for International remittance service are a multilateral effort to address a global challenge
Remittances Partnership:
•Launched during Global Payments Week 2008 in Vienna
•Focus is on regional and thematic issues
•Pragmatic approach
17
The G8 Global Remittances Working Group
Chair: WB (Michael Klein)Secretariat:FPDPR
TG 1Data
TG 2Developmental
issues
TG3Payment & Market
Infrastructure
TG4 A2F
G8G8
Advisory Commitee
Private/Public Partnership
World Bank Remittance Price Database LAUNCHED SEPTEMBER 2008!
Remittanceprices.worldbank.org To design a refined methodology to
gather comparable remittance price data and measure the economic gains from lower costs to consumers
Increase transparency
Increase competition
Inform consumers The project will assist with the delivery of
General Principle 1
19
World Bank Remittance Price Database Remittanceprices.worldbank.org
Benchmark to measure improvements in transparency, efficiency, and competition within remittance corridors
Comparisons of markets across countries and regions
Price reductions through a “name and shame” approach. An example of this has been the case of LAC, where publication of remittance fees was a factor in their reduction from 15%, on average, in the region in 2000, to 5.6% in 2006
Provides a uniform methodology worldwide
Does not replace national databases that are being encouraged for more frequent updates and a tailored outreach
Project Methodology Country Sampling methodologyA matrix has been constructed that selects 14 important remittance sending countries and identifies the volumes of remittances in the most important corridors for each country
Company Sampling MethodologyThe population of remittance firms in sending countries was identified using information from regulators where registration/licensing/oversight mechanisms exist. The sample is split between the most important non-bank RSPs and the most important banks/credit unions/MFIs in each corridor. The sample didl not include transfer mechanisms such as hawala and couriers
Amount and SpeedThe project collected data on two different price levels: the local currency equivalent of US$250, and the average amount (US$) for each corridor. The speed of the service was also recorded
World Bank Remittance Price Database Remittanceprices.worldbank.org
Project Methodology
Data acquisitionFirms were contacted to obtain the sending fees and exchange rates charged to transfer the local currency equivalent of US$250, and the average transaction amount (funds to be received in the currency of the recipient country). The day and time of the request was recorded, as was the interbank exchange rate at that day/time. The researcher also asked if there are any known fees for the recipient
Data VerificationIn some cases, actual transactions were undertaken through a random selection of firms in the corridor, including firms that cannot or did not give customers price information before a transaction has taken place. (“mystery shopping”)
Publication Published on world bank website
It is intended that the website be updated at least twice a yearThe project team is working proactively to raise awareness on the existence of the database
World Bank Remittance Price Database Remittanceprices.worldbank.org
The Country Pairs (“The corridors”)
The Country Pairs
23
Remittance Price Database: Main Findings Transparency still insufficient in some corridors
In general, banks are more costly and slower
Corridors from Spain, Singapore, US, and UK
less expensive than average (i.e. 10.5 % for
US$200 and 6.5% for US$500)
Corridors from Germany, Japan and the
Netherlands among the most expensive
Reforms to National Payments Systems crucial
24
The World Bank estimates that in 2007 global remittances reached $355 billion, of which $265 billion went to developing countries, involving some 190 million migrants or 3.0% of world population
Workers' remittances, (US$ billion) 2006 2007 % growth
World 307 355 16%
All developing countries 229 265 16%
Latin America and Caribbean 57 61 6%
The global crisis could impact remittances flows worldwide and the main Canada remittance recipients countries in 2008
Workers' remittances, compensation of employees, and migrant transfers, credit (US$ million) 2006 2007
% growth 2008e % growth
World 306,682 355,438 16% 375,015 6%
All developing countries 228,800 264,896 16% 282,793 7%
Haiti 1,062.9 1,222.1 15% 1,300.0 6%
India 25,426 27,000 6% 30,000 11%
Jamaica 1,946 2,144 10% 2,144 0%
Vietnam 4,800 5,500 15% 5,500 0%
The global average cost to consumers to send money from Canada is 14% for the local currency equivalent of USD200...
Canada USD200
14.46%
12.95%
14.11%
14.57%
Haiti
India
Jamaica
Vietnam
Corridor averages are unweighted and do not reflect the market shares of the different firms that compose the average.
..but banks are significantly more costly and slower than Money Transfer Operators
In Canada banks charge on average USD40 for a remittance of USD200 !!!!!
Canada USD200
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Haiti India Jamaica Vietnam
Bank MTO
Post office MTO/Development foundation
MTO/Building society
The cost to consumers of these remittance transactions is expensive relative to the often low incomes of migrant workers, the amounts sent, and the income of remittance recipients
Until banks are able to reduce costs to offer lower pricing, consumers will have little incentive to transfer remittances through banking channels, and get access to financial services
Any reduction in remittance transfer price would result in more money reaching remittance recipients and would have a significant effect on the income levels of remittance families
Indeed, if the cost of sending remittances could be reduced by just 5%, remittance recipients in developing countries would receive $13.8 billion dollars more each year than they do now – the equivalent of more than one IDA, each year, straight to the people
This added income could then provide remittance recipients more opportunity for consumption, savings, and investment in local economies
Coming Up: The World Bank Global Conference: “Redefining the Landscape of Payment Systems”, Cape Town, April 7-10, 2009
Thank you
Payment Systems Development GroupThe World Bank
PPP Goals
31