Examining Country: Specific Regulations Related to Money Transfer


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  • Examining Country: Specific Regulations Related to Money Transfer

    1. 1. International Remittance and Mobile Banking: Examining Country Specific Regulations Related to Money Transfer Singapore May 26 th – 27 th , 2009 Arief Hamdani Gunawan
    2. 2. Outline <ul><li>Regulatory Concepts and Implementation </li></ul><ul><li>Business Models Implementations </li></ul><ul><li>Challenge, Perspective and Choice </li></ul>
    3. 3. Regulatory Concepts Bearer Agents Remittances Payment Services E-Money Banking MNO Role Not involved in the provision of financial services Involved in cash in/out Becomes financial institution Regulatory Role No regulatory compliance AML/ CFT Prudential regulation
    4. 4. Russian Framework for Agency Models <ul><li>Banking Law (remittance/settlement by transfer, account, credit) – money transfer via bank accounts </li></ul><ul><li>Regulation of agents by banking law: in accordance to 2004 amendments, agents can accept only 4 types of payments without client’s identification: airtime, utilities, rent and telcom services. </li></ul><ul><li>Post Law: Financial services provided by post offices (postal remittances) – money transfer via post offices without opening of a bank account </li></ul><ul><li>Civil Code’s agent regulations – money transfer to merchant as agent’s function </li></ul><ul><li>Regulations of “prepaid payment cards” from 2007 - allows issuing of prepaid financial products for payments (mostly “mobile wallets”) </li></ul><ul><li>The boundary between banking, post, agent and communication services has been blurred with the advent of e-money </li></ul>Source: PROMOTING FINANCIAL INCLUSION THROUGH INNOVATIVE POLICIES, March 31 st 2009 Bearer Agents Remittances Payment Services E-Money Banking
    5. 5. Russian E-payment System Example (P2B): how it works: bank - led and nonbank - led agent - payments system operator Bank mobile phone operator Sub-agent 1 Sub-agent 2 Sub-agent 3 Source: PROMOTING FINANCIAL INCLUSION THROUGH INNOVATIVE POLICIES, March 31 st 2009 Bearer Agents Remittances Payment Services E-Money Banking
    6. 6. Moldova National Strategy for Support and Development of SMEs for 2008-2011 <ul><li>Overall: improvement of the legislative and normative framework that would be favorable for small and medium enterprises’ establishment and development </li></ul><ul><li>Specifically on remittances: </li></ul><ul><li>Enhancing financial mediation within remittances transfer options: </li></ul><ul><li>Training migrants-users of financial-banking services regarding the provided services; </li></ul><ul><li>Building capacity of the micro-financing organizations and of the Savings and Credit Associations with respect to provision of remittances’ transfer services; </li></ul><ul><li>Involving the “Post of Moldova” in the system of remittances’ transfer and payment in national and foreign currency; </li></ul><ul><li>Setting up a scheme for loans’ guarantee based on remittances. </li></ul>Source: Seminar Remittance flows from the Czech Republic and their development impact Prague, February 24 th , 2009 Bearer Agents Remittances Payment Services E-Money Banking
    7. 7. Moldova National Strategy for Support and Development of SMEs for 2008-2011 <ul><li>Adopting new technologies for remittances’ transfer: </li></ul><ul><li>Setting up legal framework for facilitating and securing the remittances’ transfers through new technologies. </li></ul><ul><li>Implementing a pilot project on money transfer banking services via cell phones; </li></ul><ul><li>Diversifying and improving financial services, increasing competitiveness and reducing the costs of these services (promoting ‘account on account’ system, ATM machine – remittances, internet payments e.g. PayPal) </li></ul><ul><li>Developing and implementing the 2+1 Program for Remittances’ Investment </li></ul><ul><li>Improving accuracy of statistics and studies regarding migrants and remittances; harmonizing and adjusting migration study methods used by different involved institutions </li></ul>Source: Seminar Remittance flows from the Czech Republic and their development impact Prague, February 24 th , 2009 Bearer Agents Remittances Payment Services E-Money Banking
    8. 8. Mobile money transfer growth in Kenya <ul><li>Launched by two main mobile operators </li></ul><ul><ul><li>Zain (17%) and Safaricom (80%) </li></ul></ul><ul><li>Safaricom M-Pesa money transfer </li></ul><ul><ul><li>It is a business proposition – Increase the data ARPU! </li></ul></ul><ul><ul><li>P2P transactions – Ksh 20 billion in September from about Ksh 1 billion in September 2007 </li></ul></ul><ul><ul><li>4.14 million registered users (September 2008) and 4,230 agents </li></ul></ul><ul><li>Zain launched ZAP on 16/02/2009 </li></ul><ul><ul><li>Sokotele service introduced before M-PESA failed </li></ul></ul>Source: Electronic/Mobile Government in Africa: Progress Made and Challenges Ahead Addis Ababa, Ethiopia; February 17 th – 19 th , 2009 Bearer Agents Remittances Payment Services E-Money Banking
    9. 9. Kenya Case Study Source: Electronic/Mobile Government in Africa: Progress Made and Challenges Ahead Addis Ababa, Ethiopia; February 17 th – 19 th , 2009 Bearer Agents Remittances Payment Services E-Money Banking Sector Case study name Financial sector (Banking) Equity Bank and Commercial Bank of Africa cases Financial sector (microfinance) Jamii Bora Mobile sector (alternative M-PESA money transfer Retail Nakumatt supermarket Information and News Media Nation Media group SMS-based news services
    10. 10. The General Principles for International Remittance Services (CPSS/World Bank - General principles for remittances - January 2007) <ul><li>The General Principles are aimed at the public policy objectives of achieving safe and efficient international remittance services. To this end, the markets for the services should be contestable, transparent, accessible and sound. </li></ul><ul><li>Transparency and consumer protection </li></ul><ul><li>General Principle 1. The market for remittance services should be transparent and have adequate consumer protection. </li></ul><ul><li>Payment system infrastructure </li></ul><ul><li>General Principle 2. Improvements to payment system infrastructure that have the potential to increase the efficiency of remittance services should be encouraged. </li></ul><ul><li>Legal and regulatory environment </li></ul><ul><li>General Principle 3. Remittance services should be supported by a sound, predictable, nondiscriminatory and proportionate legal and regulatory framework in relevant jurisdictions. </li></ul><ul><li>Market structure and competition </li></ul><ul><li>General Principle 4. Competitive market conditions, including appropriate access to domestic payment infrastructures, should be fostered in the remittance industry. </li></ul><ul><li>Governance and risk management </li></ul><ul><li>General Principle 5. Remittance services should be supported by appropriate governance and risk management practices. </li></ul>Committee on Payment and Settlement Systems / The World Bank
    11. 11. The General Principles for International Remittance Services (CPSS/World Bank - General principles for remittances - January 2007) <ul><li>Roles of remittance service providers and public authorities </li></ul><ul><li>A. Role of remittance service providers . </li></ul><ul><li>Remittance service providers should participate actively in the implementation of the General Principles. </li></ul><ul><li>B. Role of public authorities . </li></ul><ul><li>Public authorities should evaluate what action to take to achieve the public policy objectives through implementation of the General Principles. </li></ul>Committee on Payment and Settlement Systems / The World Bank
    12. 12. The most and least costly &quot;country corridors&quot;: (Country Corridors & Average cost in US$) <ul><li>$200 </li></ul><ul><li>Top 5 (least costly): </li></ul><ul><li>Spain to Brazil 7.45 </li></ul><ul><li>United States to El Salvador 9.17 </li></ul><ul><li>United States to Ecuador 9.39 </li></ul><ul><li>United States to Honduras 9.41 </li></ul><ul><li>Saudi Arabia to Philippines 9.56 </li></ul><ul><li>Bottom 5 (most costly): </li></ul><ul><li>Germany to China 49.30 </li></ul><ul><li>Germany to Romania 48.79 </li></ul><ul><li>South Africa to Zambia 47.02 </li></ul><ul><li>Netherlands to Indonesia 45.09 </li></ul><ul><li>Germany to Croatia 42.45 </li></ul><ul><li>$500 </li></ul><ul><li>Top 5 (least costly): </li></ul><ul><li>Spain to Brazil 7.68 </li></ul><ul><li>United States to El Salvador 11.35 </li></ul><ul><li>United States to Honduras 12.48 </li></ul><ul><li>Saudi Arabia to Philippines 13.50 </li></ul><ul><li>United States to Lebanon 13.65 </li></ul><ul><li>Bottom 5 (most costly): </li></ul><ul><li>Netherlands to Indonesia 86.41 </li></ul><ul><li>Germany to Croatia 85.66 </li></ul><ul><li>South Africa to Zambia 81.08 </li></ul><ul><li>Germany to China 76.74 </li></ul><ul><li>Netherlands to Dominican Republic 70.58 </li></ul>Cost includes the transaction fee and exchange rate margin. Only those corridors where all the necessary information was provided are featured. Corridor averages are unweighted and do not reflect the market shares of the different firms that compose the average.
    13. 13. Remitting from Singapore to Indonesia     12.00   Total Average     10.00   Post office Average     10.88   MTO Average     17.50   Bank Average Apr 08, 2008 Next day. However, money can only be sent to branches of Mandiri Bank 25.00 Bank Bank Mandiri Apr 08, 2008 1-2 working days 15.00 MTO GPL Remittance Apr 08, 2008 15 minutes 12.00 MTO Western Union Apr 08, 2008 1-5 days 10.00 MTO Brunphil Express Apr 08, 2008 Same day to branches of BNI in Indonesia; 5 days to all other banks 10.00 Bank BNI (Bank Negara Indonesia) Apr 08, 2008 1-3 working days 10.00 MTO One Stop Remittance Apr 08, 2008 Next day 10.00 Post office Singapore Post (Cashome) Apr 08, 2008 Next day 10.00 MTO BTI Money Transfer Apr 08, 2008 10 minutes 10.00 MTO Ameer Tech (MG) - cash Apr 08, 2008 10 minutes 10.00 MTO Ameer Tech (MG) - account Apr 08, 2008 Next day 10.00 MTO MoneyWorld Date Transfer speed Fee (SGD) Firm type Firm name
    14. 14. 1/3 rd + of the unaware in Bangladesh, Sri Lanka and Philippines willing to use money transfer services & govt services via mobile Among BOP teleusers who are not aware Source: SA Connect Public Seminar, Cape Town April 14 th , 2009
    15. 15. Bangladesh Model <ul><li>Bangladesh remittance processing </li></ul><ul><ul><li>Bank-centric market driven by currency restrictions </li></ul></ul><ul><ul><li>Many players with two dominant (IBBL and Sonali have 35% of market) </li></ul></ul><ul><ul><li>Traditional products (Cheque, TT, DD) </li></ul></ul><ul><ul><li>Non cooperation on delivery </li></ul></ul><ul><ul><li>2006-2008 developments </li></ul></ul><ul><ul><ul><li>Non bank outlets for delivery (NGOs) </li></ul></ul></ul><ul><ul><ul><li>New products being introduced (prepaid debit card and fast cash) </li></ul></ul></ul><ul><li>Improvements to Bangladesh remittance processing </li></ul><ul><ul><li>Increased use of non-bank branch outlets: </li></ul></ul><ul><ul><ul><li>Increasing the number of remittance delivery points using NGO-MFI rural branches in migrant prone areas </li></ul></ul></ul><ul><ul><ul><li>Use of bank-controlled non-branch outlets (ATM/POS) </li></ul></ul></ul><ul><ul><li>Introduction of new remittance products using technology solutions </li></ul></ul><ul><ul><ul><li>POS delivery to non-account debit card </li></ul></ul></ul><ul><ul><ul><li>Use of mobile phone technology in payments and introduction of electronic wallet </li></ul></ul></ul><ul><ul><li>Co-operation on delivery </li></ul></ul><ul><ul><ul><li>Remittance gateway “El Dorado” </li></ul></ul></ul><ul><ul><ul><li>BEFTN </li></ul></ul></ul>Source: Remittances and Payments Challenge Fund August 23 rd ,, 2008 Bearer Agents Remittances Payment Services E-Money Banking
    16. 16. Philippines Model <ul><li>Smart Money/G-Cash </li></ul><ul><ul><li>Smart money </li></ul></ul><ul><ul><ul><li>Allows users to make purchases, pay and receive domestic payments and to receive remittances by loading or transferring money from a bank account into a mobile phone or reloading a pre-paid card electronically </li></ul></ul></ul><ul><ul><li>G-Cash </li></ul></ul><ul><ul><ul><li>Uses Cash-in and Cash-out Centers via mobile phone </li></ul></ul></ul><ul><ul><ul><li>Cash-in and Cash-out Outlets accredited to convert actual money to electronic money </li></ul></ul></ul><ul><li>“ Text A Payment” </li></ul><ul><ul><li>Rural Bankers Association of the Philippines – Microenterprise Access to Banking Services (MABS) entered into a joint project with Globe Telecom thru the Text A Payment Project (TAP). </li></ul></ul><ul><ul><li>Allows micro loan clients to pay loan amortization using G-Cash platform thru SMS or texting </li></ul></ul><ul><ul><li>Lowers transaction costs and increase productivity of clients </li></ul></ul>Bearer Agents Remittances Payment Services E-Money Banking
    17. 17. Mobile Money Transfer and Benefits To Financial Institutions <ul><li>Increase liquidity- local & international remittances- earn interest on cash </li></ul><ul><li>New customer acquisitions with reduced operational expenses </li></ul><ul><li>New source of revenue from other value services e.g. micro-financing,mobile phone top up cards, international remittances , transaction fee, bill payment, etc. </li></ul><ul><li>Gather customer data and access direct marketing opportunities </li></ul><ul><li>Reduce customer churn </li></ul>
    18. 18. How Can Mobile Money Transfer Help Reduce Poverty <ul><li>Accessibility -Direct money transfer and remittances to households </li></ul><ul><li>Convenience - Building social capital and micro-financing opportunities (unbanked)‏ </li></ul><ul><li>Cost -Lower transaction fee </li></ul><ul><li>800 Million mobile phones were sold in developing countries in the past 3 years. Global remittance of $230 Billion will be over $1 Trillion in 5 years due to mobile phone users. (GSM A 2006)‏ </li></ul><ul><li>World bank estimates reducing remittance commission charges by 2-5% could increase flow of formal remittances by 50-70% and encourage delivery of lower value remittances.(World Bank) </li></ul>
    19. 19. Examples <ul><li>Swedish Postal Bank </li></ul><ul><ul><li>Check Balances/Make Payments & Conduct some transactions </li></ul></ul><ul><li>Dagens Industri </li></ul><ul><ul><li>Receive Financial Data and Trade on Stockholm Exchange </li></ul></ul><ul><li>Citibank </li></ul><ul><ul><li>Access balances, pay bills & transfer funds using SMS </li></ul></ul>
    20. 20. Mobile Money – Goes Beyond Banking High Complexity Low Complexity High Customer Value Low Customer Value Payments, Transfers and Transactions Account Management Investment Services Information Services <ul><li>Remittance / Fund Transfer </li></ul><ul><li>Micro-payment </li></ul><ul><li>Mobile Recharging </li></ul><ul><li>Commercial Payment </li></ul><ul><li>Bill Payment </li></ul><ul><li>P2P Payment </li></ul><ul><li>Virtual Wallet </li></ul><ul><li>Electronic Cash </li></ul>High Value to Unbank and Underbank
    21. 21. Mobile Opportunities Payments, Transfers and Transactions Types Representative examples Remittances / Transfers Payments / Commerce Agents / Point of Sales <ul><li>Mobile peer to peer money transfer </li></ul><ul><li>With or without bank account </li></ul><ul><li>Domestic or cross border </li></ul>Main Issues <ul><li>Payment of commerce transactions, using the mobile browser or specific mobile applications </li></ul><ul><li>Mobile storefront downloads e.g., beyond ringtones </li></ul><ul><li>Payment of monthly bills/statements </li></ul>Payment at Point of Sales by tapping a mobile device on a terminal • NFC (Near Field Communication)
    22. 22. Mobile Payment for m-Commerce <ul><li>Mobile Payment can be offered as a stand-alone service. </li></ul><ul><li>Mobile Payment could also be an important enabling service for other m-commerce services (e.g. mobile ticketing, shopping, gambling…) : </li></ul><ul><ul><li>It could improve user acceptance by making the services more secure and user-friendly. </li></ul></ul><ul><ul><li>In many cases offering mobile payment methods is the only chance the service providers have to gain revenue from an m-Commerce service. </li></ul></ul>
    23. 23. Mobile Payment <ul><li>the consumer must be informed of: </li></ul><ul><ul><li>what is being bought, and </li></ul></ul><ul><ul><li>how much to pay </li></ul></ul><ul><ul><li>options to pay; </li></ul></ul><ul><li>the payment must be made </li></ul><ul><li>payments must be traceable: account based Vs. anonymous </li></ul><ul><li>Customer requirements : </li></ul><ul><ul><li>a larger selection of merchants with whom they can trade </li></ul></ul><ul><ul><li>a more consistent payment interface when making the purchase with multiple payment schemes, like: </li></ul></ul><ul><ul><ul><li>Credit Card payment </li></ul></ul></ul><ul><ul><ul><li>Bank Account/Debit Card Payment </li></ul></ul></ul><ul><li>Merchant benefits: </li></ul><ul><ul><li>brands to offer a wider variety of payment </li></ul></ul><ul><ul><li>Easy-to-use payment interface development </li></ul></ul><ul><li>Bank and financial institution benefits </li></ul><ul><ul><li>to offer a consistent payment interface to consumer and merchants </li></ul></ul>
    24. 24. India Model MOBILE PHONE CASH SBI Core banking SBI Gateway Different people : diversity in tech: front, back and interface to accommodate Source: ICT SOLUTIONS FOR FINANCIAL INCLUSION – EXPERIENCE SHARING BY STATE BANK OF INDIA February 17 th , 2009 Bearer Agents Remittances Payment Services E-Money Banking Online in future Offline file now Application Host- Vendor’s WIRELESS - USSD BC’s mobile phone BC CUSTOMER <ul><li>Routed Offline to Technology </li></ul><ul><li>Vendor </li></ul><ul><li>3 security checks: Mobile </li></ul><ul><li>number, Booklet & Security PIN </li></ul><ul><li>Low cost entry for all </li></ul>CURRENT STATUS
    25. 25. Mobile Banking Subscriber Forecast 2007 – 2010 (Millions) 2007 2008 2009 2010 33.6 1.7 9.5 38.0 42.2 21.1 46.5 34.9 Mobile Internet Users Mobile Banking Users Source: Aite Group
    26. 26. Mobile Banking Work Group <ul><li>Objectives: </li></ul><ul><ul><li>Develop standard industry educational resources, including general terminology, teleseminars and materials that explain the current state of the mobile channel in the payments industry; </li></ul></ul><ul><ul><li>Conduct a gap analysis of the NACHA Operating Rules to understand how mobile transactions interface with the ACH Network; </li></ul></ul><ul><ul><li>Develop recommendations to accommodate payments that originate from the mobile channel in the ACH Network; </li></ul></ul><ul><ul><li>Identify any unique risk considerations for discrete aspects of mobile banking, such as authentication, authorization and overall security in the ACH Network; </li></ul></ul><ul><ul><li>Understand the long-term manifestations of mobile for other strategic ACH Network initiatives such as EBIDS, Secure Vault Payments, international and business payments; and </li></ul></ul><ul><ul><li>Recommend appropriate risk management controls to ensure the integrity of mobile transactions in the ACH Network. </li></ul></ul>Source: National Automated Clearing House Association. October 2008
    27. 27. The Benefits of Mobile Banking <ul><li>able to enact a payment from anywhere to anyone, </li></ul><ul><li>creating a macro-economic benefit that is as yet cannot be measured, but is most certainly significant. </li></ul><ul><li>increased traffic, </li></ul><ul><li>customer retention </li></ul><ul><li>improved service offerings </li></ul><ul><li>enabling immediate transactions (meaning the unbanked become banking customers), </li></ul><ul><li>alternative to carrying cash which in turn means better cash retention </li></ul><ul><li>increased security and payment efficiencies </li></ul><ul><li>reduced dependency on ATMs and branch infrastructures (meaning lowering of operating expenditure) </li></ul>Operators Banks Users
    28. 28. Mobile Banking & Couponing <ul><li>Mobile Banking is the use of mobile-phone based interfaces to provide account information and transactions opportunities to customers of financial institutions </li></ul><ul><li>Mobile Couponing are discounts, sales deals, promotions = increase redemption of goods and services </li></ul><ul><li>Excellent way to increase utilization and adoption of new and existing products and services. </li></ul>
    29. 29. Outline <ul><li>Regulatory Concepts and Implementation </li></ul><ul><li>Business Models Implementations </li></ul><ul><li>Challenge, Perspective and Choice </li></ul>
    30. 30. Business Models <ul><li>Joint venture </li></ul><ul><ul><li>Japan : D2C(Docomoand Dentsu) </li></ul></ul><ul><ul><li>North Korea: SK telecom and AirCross </li></ul></ul><ul><li>Content producers, destination, ad sales channel </li></ul><ul><ul><li>China Mobile </li></ul></ul><ul><ul><li>Reliance </li></ul></ul><ul><ul><li>AT&T </li></ul></ul><ul><li>Open approach </li></ul><ul><ul><li>Europe and North America: Vodaphone, BT 21CN, Sprint/Google Wimax partnership, Verizon </li></ul></ul>
    31. 31. D2C Joint Venture NTT Docomo and DentsuInc. <ul><li>Capital Investment: ¥ 980 Million </li></ul><ul><li>Value chain: </li></ul><ul><li>NTT Docomo(51%); </li></ul><ul><li>Dentsu(46%); </li></ul><ul><li>NTT Ad (3%) </li></ul><ul><li>Focus: mobile advertising </li></ul>
    32. 32. China Mobile, Create Whole Thing! <ul><li>Without third party </li></ul><ul><li>Aggressive VAS </li></ul><ul><li>Multi mode mobile advertising </li></ul>Monternet service
    33. 33. Verizon ‘Any Apps Any Device’
    34. 34. Outline <ul><li>Regulatory Concepts and Implementation </li></ul><ul><li>Business Models Implementations </li></ul><ul><li>Challenge, Perspective and Choice </li></ul>
    35. 35. Challenge <ul><li>Telecommunication tendency </li></ul><ul><li>Number of MNO subscriber </li></ul><ul><li>Revenue / credit per user </li></ul><ul><li>MNO based on own asset and invest in own areas (naturally light touch regulation). </li></ul><ul><li>Privacy and interconnectivity </li></ul><ul><li>Banking tendency </li></ul><ul><li>Bank user / account </li></ul><ul><li>Deposit / credit per user / account </li></ul><ul><li>Banking based on wealth management and manage investment (naturally heavily handed regulation). </li></ul><ul><li>Prudentially and security (AML, CFT) </li></ul>
    36. 36. Example: Main AML obligations <ul><li>Systems and training to prevent money laundering (train employees, establish procedures of internal control and communication which are appropriate to prevent money laundering); </li></ul><ul><li>Identification procedures (provide satisfactory evidence of identity of customers, take into account the greater risk of money laundering when customers is not physically present when identified) </li></ul><ul><li>Record keeping procedures (keep copy of identification data for at least 5 years on record); money service operator has to register with relevant authority (this in turn gives the authority the power to enter and inspect the premises, order access to recorded information and to impose penalties) </li></ul>
    37. 37. MNO Perspective High Risk Low Risk Light Prudential Issue Heavy Prudential Issue Remittances Payment Services Bearer Agents Banking E-Money
    38. 38. Mobile Operator Checklist for Business Model Choice Mobile operators can offer whole range of services: savings, loans, payments, deposit taking Bank Fully fledged banking license requirements Mobile operators can get a banking license Mobile retail stores can be used to accept/disburse cash, store cash to make payment to third parties Bearer, agent, payment service providers, e-money <ul><li>AML/CFT </li></ul><ul><li>E-Money and payment rules </li></ul>Mobile operators can do payments and e-money Mobile retail store can be used to accept/disburse cash Bearer, agent AML/CFT Mobile operators are allowed to be the agents The bearer business model is possible without major regulatory compliance problems for mobile operators Bearer None Banks are the only entities who process any sort of payments Comments Business Model Relevant Regulation Regulation Situation
    39. 39. Thank You [email_address]