WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002 1 PROJECT FOR THE REFORM OF CENTRAL BANK

WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure

June 20, 2002

1

PROJECT FOR THE REFORM OFPROJECT FOR THE REFORM OF

CENTRAL BANK OF WEST AFRICAN STATES (BCEAO)CENTRAL BANK OF WEST AFRICAN STATES (BCEAO)

PAYMENT SYSTEMS AND INSTRUMENTSPAYMENT SYSTEMS AND INSTRUMENTS

IN WAEMU MEMBER COUNTRIESIN WAEMU MEMBER COUNTRIES

Mission pour la Réforme des Systèmes et Moyens de Mission pour la Réforme des Systèmes et Moyens de PaiementPaiement


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PAYMENT SYSTEM REFORM IN WAEMU MEMBER PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESCOUNTRIES O U T L I N EO U T L I N E

WAEMU in briefWAEMU in brief

Why a Payment System reform?Why a Payment System reform?

Content of the reformContent of the reform

How to reach objectives?How to reach objectives?

Lessons learned from our Lessons learned from our experienceexperience


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WAEMU IN BRIEF

PAYMENT SYSTEM REFORM IN WAEMU MEMBER PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESCOUNTRIES


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THE WEST AFRICAN MONETARY UNIONTHE WEST AFRICAN MONETARY UNION


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Total Population > 70 Million Inhabitants

Active Population : 28 Million Inhabitants

Nber of Account Holders : 2,000,000

Account Holders / Active Population < 10%

Fiduciary Circulation / Money Supply > 30%


WAEMU IN BRIEF: FACT SHEET WAEMU IN BRIEF: FACT SHEET


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WHY A PAYMENT SYSTEM REFORM

IN WAEMU?



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Why a Payment System Reform In WAEMU?Why a Payment System Reform In WAEMU? THE RATIONALE OF THE REFORM IS THE WEAKNESSES OF

THE CURRENT SYSTEM,IN PARTICULAR:• limited number of participants• low operational security level• lack of control on the system’s capacity •poor technological infrastructures•high transactions cost• few account holders•poor interbank relationship•high use of cash • few automated operations


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Why a Payment System Reform In WAEMU : Why a Payment System Reform In WAEMU : established facts!established facts!

AVERAGE SETTLEMENT LAGS ARE:

• Checks drawn on the same bankChecks drawn on the same bank: : 24 hours24 hours

• Town checksTown checks:: 72 hours72 hours

• Checks drawn on a bank in the countryChecks drawn on a bank in the country: more than : more than 1 week 1 week

• Checks drawn on a bank in WAEMU:Checks drawn on a bank in WAEMU: 1 week to 1 month1 week to 1 month

• Checks drawn on banks outside WAEMU: Checks drawn on banks outside WAEMU: more than 1 month more than 1 month


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Why a Payment System Reform In WAEMU:current Why a Payment System Reform In WAEMU:current situationsituation

TRANSFERS25%NEGOCIATIABLE

INSTRUMENTS

CHEQUES73%

Scriptural payments in 2001: relative shares of the volume Scriptural payments in 2001: relative shares of the volume (excluding bank cards)(excluding bank cards)


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Why a Payment System Reform In WAEMU:current Why a Payment System Reform In WAEMU:current situationsituation

TRANFERS42%

NEGOCIABLE INSTRUMENTS

6%

CHEQUES52%

Scriptural payments in 2001: relative shares of the value Scriptural payments in 2001: relative shares of the value (excluding bank cards)(excluding bank cards)


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CONTENT OF THE REFORM



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Content of the Reform:Content of the Reform:major objectivesmajor objectives

increase payment systems’ efficiency and safety

reduce payment management costs

enhance interbanking and increase number of account holders

reduce use of cash in payments

comply with international standards


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Content of the Reform:various componentsContent of the Reform:various components Setting up of a real time gross settlement system

(RTGS) for large value payments

Building of an interbank electronic clearing system

Establishment of an interbank card based payment system at the regional level

Building of a suitable telecommunication infrastructure for payment systems

Adoption of an adequate legal and regulatory framework governing the new payment systems


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Content of the Reform:Overall view of the Content of the Reform:Overall view of the project project

Legal and regulatory framework

Payment Incidents Central

Telecommunications system

Regional Credit card

system

CLEARING SYSTEM

RTGSSystem

RetailPayments

SystemicallyImportant Payments

Local

National

regionalE

xcha

nges


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Building a RTGS system: a strategic decisionBuilding a RTGS system: a strategic decision

A RTGS system favors the development and integration of regional capital markets

Rapid and efficient

Infrastructure

Secured Financial

Instruments

Liquid capital markets

Financial Efficiency


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Functioning of BCEAO’s RTGS systemFunctioning of BCEAO’s RTGS system

Direct exchanges between participants at a regional level

Including a real time Delivery/Payment system

for public securities held by BCEAO,based on the Cash settlement accounts

managed in the RTGS system


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RTGS system : criteria for membershipRTGS system : criteria for membership

BCEAO HQ Institutions SA

Main BranchS.A.E P. S.A.E.P.

IndirectParticipant

...

Regional RTGS system

Transfer system outside the region

S.A. BCEAO

Main BranchS.A.E P.. BCEAO SASA.E.P.

BCEAOParticipant

MainBranch

N.E. C.A.

Customers

N.E. C.A.

Non eligibleThird party

BCEAOoperations

MainBranch

BCEAOOperations

Direct Participant

Customers

ParticipantIndirect

ParticipantBCEAO

Sub-Participant

Customers

Indirect Participants

DirectDirect

Customers

Sub-Participant

Customers

Indirect Participant

Customers

Non Eligible-Third party


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Operational management of the RTGS system

Authority responsible for the supervision of the RTGS system

Activity Central Bank

PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESPAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIES The roles that BCEAO should playThe roles that BCEAO should play

BCEAO participants

RTGSSystem

BCEAO Operations Operationsfor non eligible third parties

Indirect Participants

Direct Participants

Sub Participants

Intradayadvances

Provision of services


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The Automated Clearing system:key optionsThe Automated Clearing system:key options Instruments that may be accepted for clearance

All existing types of scriptural instruments

AcceptanceNATIONAL values presented at the all

Clearance Access Points (CAPs)regional values will be accepted at the CAPs

once the RTGS is operational

ParticipantsThe Central Bank, Treasury, Post Office ,

commercial banks


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The Automated Clearing system:Functioning The Automated Clearing system:Functioning principles principles

Automated process from exchanges to settlement.

Clearing exclusively processed on banks ’ electronic remittance files

Different channel for the exchange of paper based values which may be used as proof

Suppression of clearing sessions and creation of a frontdesk for the exchange of paper based values

Same time required for settlement or rejection according to the nature of the the settlement


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The Automated Clearing System : check imagesThe Automated Clearing System : check images

The use of a system based on check images for the exchange of paper based values, in order:

not to depend on the paper based circuit

to reduce considerably the time required for settlement

to avoid banks representation


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Card based payment system: orientationsCard based payment system: orientations

The card based system rests on the following principles:

a regional interbanking

a regional payment or debit bank card

a smart card technology


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Card based payment system: orientations Card based payment system: orientations (continued)(continued) A card based interbanking means:

An alternative payment instrument

A specific interbank trade mark and logo

A new instrument of negotiation with the major international bank card networks

Optimized infrastructures

Scale economies

Optimized security


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Card based payment system: operational Card based payment system: operational aspects aspects

Acquéreur

Emetteur

Emission : PersonnalisationGestion des oppositionsAcquisition : AutorisationGestion des TPETélécollecteTraitement

G I M-UEMOA

Porteurs

Commerçants

BCEAO

Banking institutionsMember of the regional

interbank system

Control and Participation

RegulationlementationPromotion

RepresentationSpecificationsSecuritydevelopments

TPE

DAB / GAB

Guarantor of interbanking

Technical operator

Center reponsible for themanaprocessiio de TraitementMonétique

Control


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Telecommunications infrastructure: why?Telecommunications infrastructure: why?PAYMENT SYSTEMS REQUIRE

A good quality, efficient and performing telecommunication network at the regional level,

which guarantees :

a great availability

reliability, integrity and confidentiality of financial information

good quality of services which should be the same at all access points of the network

optimal investment and operation costs


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Telecommunications infrastructure: Global architecture of Telecommunications infrastructure: Global architecture of the networkthe network

FF

Participant

Tour radio

Main Branch BCEA0 HEADQUARTERS

Satellite

Tour radio

SUB BRANCH

FF

Participant

FF

Participant

FF

Participant

FF

Participant


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The legal and regulatory framework: strategyThe legal and regulatory framework: strategy

Legal security of payment systems

Clear, accessible rules and procedures which may be easily interpreted

Legal environment notably adapted to electronic payments

Rules complying with international standards


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The legal and regulatory framework: objectiveThe legal and regulatory framework: objective

Translate into legal texts the options made for the systems to be put in place

Define the various procedures for the adoption of texts


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Content of the Reform:overall schedule of the Content of the Reform:overall schedule of the projectproject

Legal and regul. FrameworkLegal and regul. Framework first quarter first quarter

of 2003of 2003

Telecom. InfrastructureTelecom. Infrastructure mid 2003mid 2003

Automated Clearing systemAutomated Clearing system mid 2003mid 2003

RTGSRTGS end of 2003end of 2003

Card based payment systemCard based payment system mid 2004mid 2004


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HOW TO REACH OBJECTIVES?



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Organizational chart of the ProjectOrganizational chart of the Project

Advisory Committee on Payments

sub committees

Steering committee

BCEAO project group

D.E. D.E.M.

D.A.J.

Steering committee (National Directions)

S.C MRSMPCorrespondent

S.I.

S.E.

M.R.C.I.P.

“ Clearing ”“Card based systems ”

“ RTGS operations ”“ Treasurers ”

“ Legal and regulatory framework ”

Committee of Experts

“ Advisory Committee on Payments ” “ International Expert Panel ”

M.R.S.M.P (project manager)

D.C.

D.I.

D.O.F.

D.C.B.

S.O.F. S.C.B.


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LESSONS LEARNED FROM OUR

EXPERIENCE?



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Lessons learned from our experience: management of Lessons learned from our experience: management of the projectthe projectA global and multidisciplinary approach, taking into account:

the solution of all problems relating to payment systems

the establishment of an appropriate legal framework

the enhancement of telecommunications systems

the establishment of international cooperation between the central banks

the monitoring of the project management: planning, financing and follow up of the implementation

the development of communication and sensitization actions

the building up of a database to monitor the systems


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Lessons learned from our experience: implementation Lessons learned from our experience: implementation aspectsaspects

The Central Bank plays a decisive role in the modernization of payment systems

A close collaboration between banks is necessary

A prudent and step by step approach for the implementation of such a complex project is necessary with a clear distinction between the various fields.


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Lessons learned from our experience: implementation Lessons learned from our experience: implementation aspectsaspects

The involvement of the banking community at all levels in the implementation of the project is crucial for its success

Collaboration between banks and the central bank should be supported by concrete actions in implementing

Peculiar attention should be given to the choice between an in house development and acquisition of software packages


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Lessons learned from our experience: specifications of Lessons learned from our experience: specifications of systemssystems

Security should be taken into consideration from the very beginning and throughout the systems implementation process

For the choice of the communication network, an equilibrium between security and costs is necessary, on the basis of an in-depth analysis of the most appropriate mode of communication.


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THANK YOU FOR YOUR THANK YOU FOR YOUR ATTENTION ! ! !ATTENTION ! ! !

Documents

WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002 1 PROJECT FOR THE REFORM OF CENTRAL BANK