Embed Size (px)
Citation preview
Bank of Papua New Guinea
Developments in the PNG Na7onal Payments System 2008-‐2018
Port Moresby, 27 November 2015
Andrew Mason NPS Development Programme, BPNG
What is the Na*onal Payments System (NPS)?
• Everything related to the movement of money from payer to payee, comprising: – Instruments (cash, cheques, cards, etc.)
– Infrastructures (to handle instruments)
– Ins*tu*ons (banks, microbanks, etc.)
– Market arrangements (conven*ons, contracts)
– Legal environment (laws, regula*ons, rules)
The NPS provides the lubrica*on for the na*onal economy
NPS
Why is it important?
• An efficient, secure, reliable NPS: – Reduces cost of buying & selling – Reduces reliance on cash – Reduces risk of fraud – Minimises risk of financial shocks
– Promotes economic development and growth by: • Enabling more efficient use of money
• Engendering trust
– Supports financial inclusion & development of rural enterprises
– Makes PNG more aOrac*ve as a place to do business
Financial Institutions (Payment Systems)
Inter-FI Transfer (Clearing) Systems
“Real” Economy (Buying & Selling)
Final Settlement
The NPS is a hierarchy of players and systems
5
Risk is progressively concentrated
Consumer protec7on
Legal certainty
Level Playing Field: * Universal access * Interoperability
Requirements
Individual payments:
The system:
Low cost
Reliability
Speed Convenience
Safety
Confiden7ality
Our Objec*ve
• Electronic payments predominate • Wide choice of modern affordable payment services
• All payment systems fully interoperable
All ci7zens have access wherever they are at any 7me
BPNG’s role
Objec*ve:
“…. to promote an efficient na*onal and interna*onal payments system” (Central Banking Act 2000)
Goals: 1. “Reform the current payments system, with enabling legisla*on where appropriate, to
improve efficiency with respect to *mely clearing of transac*ons, reduc*on in costs and risks, within PNG and with the rest of the world.
2. Reduce the reliance on cash and cheque payments and move towards electronic payments.
3. Improve the linkages between the various parts of the payments system.
4. Improve and advance the payment system services, including mobile phone banking, to the rural areas to increase financial inclusion of the popula*on.”
(BPNG Strategic Plan 2012-‐2015)
Where we were in 2008
• Cash was dominant (and s*ll is) • ~90% of people had no access to the formal financial system
• Cheques were really the only form of non-‐cash payment • Slow • Inconvenient • Prone to error • Prone to fraud • Only possible if you had a bank account
• Many people with bank accounts preferred to withdraw cash • Few bank branches outside main centres • Limited number of other ins*tu*ons • Electronic payments growing (but none inter-‐bank except some EFTPOS)
NPS Developments in PNG
2008 Review of the PNG NPS
• Roadmap for developing a world-‐class na*onal payments system in PNG
• Based on the World Bank’s Nine Pillars: 1. Legal and regulatory environment 2. Large-‐value and *me-‐cri*cal payments 3. Retail payment systems 4. Government collec*ons and disbursements 5. Securi*es systems 6. Money markets 7. Interna*onal remiOances 8. Oversight 9. Co-‐opera*on
NPS Developments in PNG
Launch of the Strategy November 2009
• Ac*on Plan: – Set an ambi*ous programme (~3 year *meframe) including:
• New legisla*on • Automated Transfer System • Government payments • Na*onal card switch • BPNG Payment Systems Department including Oversight
• Na*onal Payments Council
Payments System Department Oversight
Design Procurement Implementation
ATS Project Stream
Government Payments Project Stream
Establish National Payments Council
Enabling Framework
Institutional
Infrastructural
Architectural
Scorecard in 2015
• Fully achieved: ✔ 1. New legisla*on & related regulatory materials 2. Automated Transfer System
• Par*ally achieved: 1. Government payments 2. BPNG Payments Unit (without Oversight func*on)
• Not achieved: ✖ 1. Na*onal card switch 2. Na*onal Payments Council
~
Legisla*on/Regula*ons
Na7onal Payments System Act 2013 • Recognises/legalises:
– Electronic records – Cheque imaging/trunca*on – Finality & irrevocability of RTGS payments – Nekng – Use of electronic money
• Gives BPNG licensing and oversight powers • Covers insolvency ( “zero hour rule”) • Protects collateral arrangements • Mandates establishment of Na*onal Payments Council
Rules & Procedures • KATS System Rules • Record of Arrangements Between Banks (RABB) • MoU with KATS par*cipants
Kina Automated Transfer System (KATS)
* Procurement 2010-‐2011
* Implementa7on 2012-‐2015
KATS is a world-‐class system. Some think it is the whole PNG NPS (not true!), but it is a systemically important system:
• It processes inter-‐bank1 electronic payments on two levels: 1. Real Time Gross SeOlement (RTGS) 2. Automated Clearing House (ACH)
• It is two systems in one: • More cost effec*ve • Less *me to get working • Simpler for par*cipants 1 Only banks are par?cipants at present
RTGS
• High value payments which may involve systemic risk • Each payment is seOled irrevocably in BPNG’s books • All payments are made between banks (inc. BPNG):
– Banks transac*ng between themselves
– SeOlement of securi*es transac*ons
– Large or urgent payments by bank customers
– Major government payments
– SeOlement of ACH net posi*ons (see next slides)
• Live since October 2013
ACH
• Most payments are low(er)-‐value, high volume, e.g.: – Salaries – Companies paying suppliers – Individuals paying bills – Regular payments of rent, loans, etc. – Consumer purchases
• Historically mostly made in cash or by cheque (some EFTPOS)
• It is more efficient to handle these in a bulk clearing process – and each payment by itself poses no systemic risk
Credit transfers
Secure link Secure link
2) Payment Details
4) Payment DetailsKATS
Individual or Company Payer
Business or IndividualPayee
1) Payment Instruction
3) Settlement
Payer’s Bank Payee’s Bank
Bank B Bank A
Cheque payments
Secure link Secure link
3) Cheque image and details submitted
KATS
1) Cheque Payment
2) Cheque Deposited
5) Cheque image and details,
Payment request
7) Funds transfer or Dishonour
notice
8) Funds or Dishonour details
Customer/ Payer
4) Settlement
6) Cheque image and details Received
Merchant / Service ProviderPayee
Payee’s BankPayer’s Bank
18
Bank A Bank B
Bulk clearing
Payments are accumulated and then neOed off four *mes per day:
These posi*ons are then seOled in the RTGS element of KATS
Opera*onal : Cheque Trunca*on: September 2014
Direct Credits: February 2015
Bank Credit Debit
A 3,750,000
B 1,455,000
C 3,800,000
D 1,505,000
KATS payment volumes 2015
0
5,000
10,000
15,000
20,000
25,000
0
50,000
100,000
150,000
200,000
250,000
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
RTGS Pa
ymen
t Volum
es
Che
que an
d DC
Paymen
t Volum
es
Cheques Direct Credits RTGS
Benefits of KATS
• Fast, secure, efficient payments
• Reduc*on in cash usage • Reduc*on in cheque usage • Less queuing at banks • Faster collec*on of Government revenues
• Enhances PNG’s reputa*on as a place to do business • Founda7on for extensive further developments, par7cularly in
innova7ve payments, financial inclusion
Government payments
• Department of Finance: – Connec*on to Integrated Financial Management System (IFMS) – Progressively replace cheques for all payments:
• Faster • Assured, *mely receipt of funds • Reduced fraud
– Trialling early 2016 • IRC
– Started collec*ng tax payments via RTGS 2013 – Full integra*on with tax management system SIGTAS planned for 2016
• Customs – Real-‐*me payment of duty = faster turn-‐round at ports – Trialling early 2016
So here we are in November 2015
The story so far (recap): • NPS Act gazeOed in 2013
• KATS live for RTGS, cheques and Direct Credits since February 2015
• Since 2008, marked growth in: – Number of financial ins*tu*ons and outlets (especially microbanks) – Payment services and instruments (especially mobile phone-‐based)
Where are we going? • NPS Strategy and Ac1on Plan 31 October 2015:
– Maps out the future of the NPS for the next three+ years
The updated Strategy
• Feeds into BPNG’s forthcoming corporate strategy for 2016 – 2020
• Approved 31 October 2015
• Available on BPNG website: www.bankpng.gov.pg
Pillar 1 – legal & regulatory
• Supplementary Pruden*al Standards covering: – Electronic funds transfers – Retail payment instruments – Oversight – Agent banking to “... give stakeholders certainty and clarity as to the implementa*on of (the NPS Act)”
• IFC providing specialist technical assistance
• To be completed during 2016
Pillar 2 - large-value & time-critical payments
– Assess KATS for compliance with PFMI1 (interna*onal ‘best prac*ce’)
– Finish implementa*on of RTGS AML module
– Extend par*cipa*on to non-‐bank financial ins*tu*ons (NBFIs)
1 Principles for Financial Market infrastructures published by the Bank for Interna*onal SeOlements
NBFI par*cipa*on in KATS – what’s involved?
1. Develop project plan with BPNG 2. Business/technical briefing 3. Check/upgrade internal system(s) 4. Get network connec*ons 5. Do training 6. Conduct tes*ng 7. Start using KATS How long?
– That mainly depends on the ins*tu*on – First one or two by end 2016
Pillar 3 – retail payment systems
• New KATS par*cipants (see previous slide)
• (Possible) further KATS development – Instant Funds Transfer (IFT)
• Direct Debits (by Q4 2017)
• Na*onal card/mobile payment switch
Na*onal card/mobile switch
• Objec*ves: – Ensure interoperability of all payment services in PNG – Enable smaller providers to get into the market at a reasonable cost (promote compe**on) – Widest possible geographical coverage
• All providers of card/mobile payment services will be connected
• Specifica*on and procurement star*ng now
• BPNG will consult with current and poten*al PS providers during specifica*on process
• Target live date (with pilot par*cipants) in Q1/2017
• Fully opera*onal by end Q2/2018
• Ini*ally planned to be a simple switching opera*on but could be developed to support a range of payment services for par*cipants without their own systems
• BPNG will purchase and operate but consider dives*ng in the longer term
RTGS (KATS)
Na*onal Switch
Bank Mobile payment service provider
NBFI
“Par7cipants should compete on services but co-‐operate on infrastructure”
Pillar 4 – Government payments
• DoF – Integra*on KATS/IFMS for all Departments using IFMS
• IRC – Tax payments to IRC’s account fully live now – Integra*on with SIGTAS during 2016
• Customs – Tes*ng KATS/ASYCUDA integra*on with banks and
Customs in early 2016 – Fully live by mid-‐year 2016
Pillar 5 - securities systems • Central Securi*es Depository included in 2009 Strategy to provide *ght
integra*on with KATS for: - Delivery versus Payment (DvP) for securi*es transac*ons - Suppor*ng liquidity management in KATS via repos over securi*es
• Dropped from procurement awer extensions to BPNG’s exis*ng Registry system to support DvP
• World Bank/DoT/BPNG Financial services Sector Review 2015 recommends procurement of a full-‐func*onal CSD
• BPNG will: - Develop detailed specifica*on for a full-‐func*on CSD - Procure the system:
- either develop the exis*ng system - or procure a packaged CSD
- Develop an electronic secondary market system for securi*es and equi*es
Pillar 6 – money markets
• Nothing specific planned (any development will be included in Pillar 5 ac*vi*es)
Pillar 7 – interna*onal remiOances
• Within the brief of the BPNG Oversight func*on (see next slide)
• Negligible inward flows (no PNG diaspora)
• Outward flows mainly (rela*vely) high value
• BPNG will gather sta*s*cs and take ac*on if necessary
Pillar 8 -‐ oversight
• Oversight is not the same as Supervision • It is an important element of a modern NPS – responsibility to monitor:
- Efficient opera*on of the NPS - Development opportuni*es - Level playing field - Consumer protec*on - Interoperability - etc.
• BPNG Oversight & Compliance Unit established November 2015 • IFC providing technical assistance in establishment and opera*ons • NPSOCU will be fully func*onal by Q3 2016
Pillar 9 -‐ co-‐opera*on
• Establish the Na*onal Payments Council – Mandated in NPS Act 2013 – Chaired by the Governor, BPNG – Objec*ves will be (inter alia) to :
• serve as a forum for co-‐opera*on across the whole NPS • play a key role in promo*ng financial inclusion and consumer protec*on
– Broad stakeholder representa*on from • Banks • Other financial ins*tu*ons • Government departments and agencies • Regulators • Mobile network/payment operators • Others (e.g. POMSoX)
– Representa*on at senior level – Consulta*ve and advisory rather than decision-‐making or prescrip*ve
