20-21 october 2003palais des nations, geneva e-payments, e-finance and smes: implications for...

20-21 October 2003 Palais des Nations, Geneva

E-Payments, E-Finance and SMEs: Implications for transition economies

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Rouben Indjikian

Senior Economic Affairs Officer

E-Commerce Branch, SITE, UNCTAD

UNCTAD-UNECE Conference on ICT and E-Business Strategies for Transition Economies,

Geneva 20-21 October 2003


Outline

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The Future of E-Finance MarketsSelected e-payments instrumentsSMEs access to finance & e-financeSME access to e-procurementsProspects for transition economy SMEsConclusions


The Future of E-Finance : E-Banking and E-Brokerage

According to a forecast the e-banking share in banking sector of developed countries might increase to up to 50% in the middle of this decade, while in many DEs and TEs –it can reach between 20% and 35%-the latter in case of improved policy environment.

In the case of e-brokerage that share might reach 80% in developed countries and from15% to 40% (improved policy) in emerging ones.

In fact Estonia is one of the world leaders in e-banking Future?- personalised WebPages where clients assets

and liabilities are programmed to optimise their future cash flows and investment decisions based on future incomes, preferences and online advise of financial intermediaries.

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E-Finance for SMEs: selected B2C online payment instruments

Credit, debit cards and prepaid cards getting combined into smart cards (Visa, MasterCard, Amex etc). So far smart cards represent less than 10 % of all cards and a bulk of it is in B2C. However, in 2-3 years they might capture from one third to half of the cards market.

Digital wallets (Yahoo Inc., Microsoft Passport); Peer to peer (P2P) payments (Paypal, BillPoint,

PayDirect); Virtual escrow systems (escrow.com, tradesafe.com) Electronic bill payment and presentment or EBPP (e-

route, billserv.com, CheckFree).

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E-Finance and B2B: selected online payment instruments

Electronic checks, Electronic invoice payment and presentment (EIPP);

Financial Services Markup Language (FSML), digital signatures el al;

Public key infrastructures (PKI): issues of interoperability customisation, pricing, governance and oversight;

From Business banking to Internet banking: FSTC Bank Internet Payments System (BIPS) as a front end to existing ACH debits and credit, wire transfers and other networks;

The new leaders - smart cards: with decreased costs in coming years they might capture the considerable part of online payments market. Increasing role in B2B payments as exemplified by Visa Commerce Card.

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SMEs & E-Business: getting financed

As high perceived risks SMEs have difficult access to bank credits.Venture capital, leasing, are much less developed in TEs. Hence the need to overcome market failures through national governments and international support measures.

Apart from direct financing of SMEs governments might ensure subsidies through tax and tariff brakes and lower than market interest rates. Guarantee programmes could also be instrumental to raise credits and venture capital (VC) for SMEs. Thus US Small Business Investment Act of 1958 endorsed SBA(Administration) guarantees to cover SBIC(Corporations) risks. Since then the venture capital industry thrived. Development Bank of Puerto Rico is actually practicing card based low cost credits for SMEs.

External programs for SMEs in CEEC&CIS from WB, EBRD, EU, EIB, bilateral donors and NGOs as well as international VCs, business angels, leasing industry and others might correct the inadequacies of local financing in many TEs and help their SMEs and start ups to launch new e-business and e-commerce.

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E-Finance for SMEs: the opportunities of e-marketplaces

E-markets for goods and services and large e-procurement platforms might open chances to SMEs from TEs to supply goods and services. As trusted suppliers the SMEs might eventually get e-finance, for pre-export, working capital etc.

Those SMEs, which adapt fast to EDI type foreign trade and trade finance platforms for online negotiation, contracting, delivery and e-payments (Bolero, Tradecard , CCEweb etc), might greatly benefit by participating online in trade and payment transactions.

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Public and private e-procurement: building up a critical mass

Card based purchases by corporate and government employees replacing paperwork.

Increasing use of smart cards facilitating the dissemination of a culture of e-payments.

Governments and companies embracing the Internet as a platform for networking within and between themselves and streamlining services delivery and procurement operations.

E-governments as primary drivers towards new economy in many transition economies.

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E-Procurement: opportunities for SMEs

Open competition to participate in public or private e-procurement tenders might give better chances to transition countries enterprises to supply goods and services. As trusted suppliers those enterprises might eventually get e-finance, for pre-export, working capital and other needs.

Those enterprises, using EDI type foreign trade and trade finance platforms for online negotiation, contracting, delivery and e-payments might easily adapt to say smart cards while getting e-payment from clients or paying to subcontractors in the online supply chain.

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E-Finance: new opportunities for transition economies enterprises

Working with global and regional e-marketplaces as suppliers and buyers might give access to enterprises to advanced e-business models and e-finance. Clustering might give a similar effect.

Having ISP and Internet banking locally might facilitate access to global e-marketplaces and e-finance platforms.

Leapfrogging towards advanced Internet technologies say through immediate introduction of smart cards might push enterprises to start doing e-business and seeking online short term trade finance and even longer-term finance.

Skipping magnetic strip technology in Poland by directly installing smart chip technology and advanced acceptance terminals to backstop online payment systems was an example of leapfrogging

Public-private partnerships with international support might encourage entering into the world of e-business and e-finance.

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Thank you for your attention

for further information

please contact

[email protected]

or consult and download documents from

http://www.unctad.org/ecommerce

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