Transformation of Payment and
Settlement Systems in Bangladesh
and the Subcontinent
SWIFT Business Forum Bangladesh 2014
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Transformation of Payment and Settlement
Systems in Bangladesh and the Subcontinent
Organized by
Society for Worldwide Interbank Financial
Telecommunication (SWIFT), Asia Pacific
Anis A. Khan
Chairperson,
SWIFT Member & User Group of Bangladesh
&
Managing Director & CEO
Mutual Trust Bank Limited
Presented by
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Introduction
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
New Frontiers
in Payment
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
The Way We Pay Is shifting away from
traditional means
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
THE SHIFT
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
The use of cash and cheques are on the decline and
there is now an increasing trend in use of credit and debit cards.
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
New means of payments are being introduced everyday
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
People are beginning to make payments with their phones
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
QR code payment
Beacon
Mobile POS devices
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
THE IMPACT
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Credit and debit are replacing cash and checks.
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Merchants will continue to adopt mobile card readers.
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Mobile-enabled commerce is going to take off
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
THE DRIVERS
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Driving Forces
Mobile devices are everywhere
Convenience
Mobile payments are catching on in retail
Financial inclusion
Mobile-enabled commerce
Security
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Payment Systems
in the subcontinent
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
INDIA
Regulatory body
Board for Regulation of Payment
and Settlement Systems
Schemes
Real Time Gross Settlement (RTGS)
National Electronic Funds Transfer (NEFT)
Notable fact
E-payments in India have been growing
at a fast rate of 60% over the last 3 years
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
NEPAL
Regulatory body
Nepal Rastra Bank (NRB)
Schemes
Indo-Nepal Remittance Facility, based on NEFT
Introduction of National Payment Switch (NPS),
soon to come into operation
Notable fact
NPS aims to cover government collections/
disbursements and welfare payments
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
PAKISTAN
Regulatory body
State Bank of Pakistan (SBP), payment system
authority
State Bank of Pakistan Act & Payment Systems and
Electronic Fund Transfer (PSEFT) Act
Schemes
Pakistan Real Time Interbank Settlement Mechanism
(PRISM), based on RTGS
NIFT, a semi-automated clearing house
Central Depository System (CDS) for Corporate
securities settlement
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
SRILANKA
Regulatory body
Central Bank of Sri Lanka
Schemes
RTGS, a combination of
Sri Lanka Interbank Payments System (SLIP)
Cheque Imaging and Truncation (CIT)
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Situation in Bangladesh
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Traditional Scenario
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Paper based payment system
Semi-automated
Time consuming and prone to risks
Traditional Scenario
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Old Payment and Settlement Systems
Interconnected systems
BB’s Clearing Houses
Sonali Bank's
Clearing Houses
BB large value
cheque settlement
system
BB Foreign
Currency Clearing System
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Recent Developments
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Payment Systems Strategy
Strategic Plan 2010-2014
“Develop effective and efficient currency
management alongside establishing fast
and secure electronic payment systems for
facilitating financial inclusion.”
Bangladesh Bank
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Establish required legal and regulatory framework for electronic payment systems
Promote and encourage the use of electronic funds transfer, mobile financial services, ecommerce, m-commerce, ATM, POS
Establish National Payment Switch (NPS)
Establish e-Payment gateway.
Establish Real-Time Gross Settlement (RTGS)
Objectives
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Modernization of existing
payment platforms
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Real Time Gross Settlement
Payment process and settlement take place continuously in real
time (without deferral) and gross (transaction by transaction)
Settlement Account Processing
Settlement of only credit transfer instruction with sufficient
balance in the settlement account with the Central Bank
Finality and Irrevocability
Settlement of Credit Transfer Instruction is guaranteed for its
Finality and Irrevocability. Thus, it gives minimum scope for
settlement risk.
RTGS - Features
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Key focus areas for RTGS
Efficiency enhancement in
payment systems
Standardization and inter-operability
Payment system literacy and
visibility
Risk mitigation in payment
systems
Compliance with international standards through oversight
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Payment / Settlement Workflow Bangladesh Bank
RTGS
SWIFT
BACH
BEFTN BACPS
NPSB Visa
Master
Chinapay
Europay
Amex
Issuing Bank
Merchants
Member Banks
Customers
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Mobile Financial Services
Agent Banking
National Payment Switch Bangladesh
(NPSB)
Facilitation of e-Commerce & m-Commerce
Internet Payment Gateway(IPG)
Introduction of other
Financial Services
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Disbursement of foreign remittances
Cash in /out using mobile account
Person to Business Payments
Business to Person Payments
Government to Person Payments
Person to Government Payments
Microfinance
Overdrawn facility
Insurance premium
Deposit Schemes (DPS)
Mobile Financial Services
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
National Payment Switch Bangladesh
NPSB
Internet
POS
Mobile
ATM
IPG
(Internet Payment Gateway)
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
BB has permitted inter-bank transfer of funds up to
BDT 500,000 via internet banking
Telcos have permission for m-Commerce related
transactions
e-Commerce &
m-Commerce
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Introduction to Agent Banking
BB has given us the guidelines
Browser based agent banking solution introduced
A number of banks received approval for agent banking
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Risk Management
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Developing Regulatory Framework
Payment Systems Oversight
Technological means
Measures Taken
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Bangladesh Payment and Settlement Systems
Regulations (BPSSR), 2009
ICT Guidelines
Bangladesh Automated Cheque Processing Systems
(BACPS) Operating Rules and Procedures, 2010
BEFTN Operating Rules, 2010
Guidelines on Mobile Financial Services, 2011
Guidelines on Agent Banking for Banks, 2013
BPSSR, 2014
Regulatory Framework
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Responsibility of Central Bank
Maintains systemic stability in payment
systems
Aims at ensuring that the systems are set
up in such a way as to minimize the risk
potential
Payment Systems Oversight
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Technological means
Initiatives taken by:
Regulatory bodies Market players Two Factor Authentication
For e-commerce –
1) Initiation
2) Transaction verified through
cellphone
Digital Signature
Electronic Security Key
Two Factor
Authentication
Digital Signature
Electronic Security Key
Introduction of “Chip and
PIN” (EMV)
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Future prospects
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
RTGS will work as the back-end
Linked to BB core banking solution
Both individual interbank transactions as
well as Deferred Net Settlement Batches
will go through RTGS
Migration to RTGS
BACP, BEFTN, NPSB
RTGS BB
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Inclusion of commercial
payment providers
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Inclusion of commercial
payment providers
Why is it necessary ?
It will help local outsourcing agencies
Increased participation in global economy
Greater economic growth
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Inclusion of commercial
payment providers
Challenges
Lack of confidence from payment providers
Hesitation about the readiness of our financial
infrastructure
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Inclusion of commercial
payment providers
How to overcome challenges
Increase interoperability between payment systems
Commitment from government
Encouragement and support from regulatory bodies
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
TRADE SERVICES UTILITY (TSU)
A SWIFT Product
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
TRADE SERVICES UTILITY (TSU)
What is it?
A SWIFT initiative
A centralized matching and workflow engine
This enables open account transactions
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
TRADE SERVICES UTILITY (TSU)
Benefits
Lower investment costs
Better productivity
Supply chain visible to the bank
Predictability
Interoperability
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
TSU Workflow
Currency Hedging
In-sourcing Payables/
Receivables
Risk Management
Supply Chain Finance
Guaranteed Payment
Data Checking
Document Preparation
Cash Forecasting
Process Efficiency
Liquidity Management
T
S
U
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Incorporating SWIFT in RTGS
SWIFT Member and User Group of Bangladesh
is looking forward to SWIFT’s support
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Incorporating SWIFT in RTGS
How?
Settlement done via SWIFT platform
A safeguard against operational disruptions
As a backup platform
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Incorporating SWIFT in RTGS
Benefits
Increased interoperability between banks
Standardization (ISO 20022, used by BB for RTGS)
Increased security
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014
Transformation of Payment and Settlement Systems in Bangladesh and the Subcontinent
SWIFT Business Forum Bangladesh 2014 August 13, 2014