LSCM Logistics Summit 2014 E-cheque: Cheque of tomorrow Mr. Shu-Pui Li Head, Financial Infrastructure Development Division Financial Infrastructure Department Hong Kong Monetary Authority 18 September 2014
Background The HKMA s review of retail payment services indicated that paper cheques continue to be heavily used in the society Around 400,000 cheques are cleared through Hong Kong Interbank Clearing Limited per day Inefficiencies of paper cheques Resource intensive and costly for banks to process cheques (Hong Kong banks need to spend up to HK$1.7 billion a year) Increasing challenge for banks due to a wider usage of RMB cheques (e.g. for RMB IPO and RMB insurance policies) Paper based meaning not environmental-friendly Not convenient to use as it requires physical delivery and presentment 2 2
E-cheque E-cheque: has a similar image layout of paper cheque in PDF issued, delivered and presented electronically Key features: bill of exchange under the Bills of Exchange Ordinance (BOEO) non-negotiable and non-transferable digitally by payer and certified by payer s bank support HKD, USD and RMB denominated 3 Target launch date: 2H 2015 3
Benefits of Retain all basic features and benefits of paper cheque and with the following additional benefits: remove the need for physical delivery and presentment carry enhanced security features remove the costly and manual processing of paper cheque Possible to expand to cross-border usage in the future overseas residents with bank accounts in Hong Kong can easily issue and present 4 Potentially cross-border cheque collection service can be facilitated by 4
E-cheque Flow (for banks which provide issuance and presentment services on their own) Payer 4B Alternatively, payer can send to payee via email (if payer wishes to send e- cheque to payee, probably together with other documents) Payee through Internet Banking or other authenticated means 1 Request for issuing 3 4A Send to payee by payer s bank by email 5 Present through Internet Banking or other means 2 Create 6 9 Verify signature, internal records and check for duplicate presentments Payer s Bank 8 Inward clearing file and s HKICL Clear and settle 7 Outward clearing file and s Payee s Bank Verify signature, payee identity and credit deposit 5
E-cheque Flow (for banks which ride on HKICL s centralized presentment portal to provide presentment service to their customers) Payer 4B Alternatively, payer can send to payee via email (if payer wishes to send e- cheque to payee, probably together with other documents) Payee through Internet Banking or other authenticated means 1 Request for issuing 3 4A Send to payee by payer s bank by email 5 Present and input payee s bank details through centralized portal 2 Create 10 Verify signature, internal records and check for duplicate presentments Payer s Bank 9 Inward clearing file and s 6 Verify signature HKICL/ Centralized Presentment portal Clear and settle 7 Outward clearing file and s Payee s Bank 8 Verify payee identity and credit deposit 6
Animated video 7 7
Security measures Virtual cheque book: Avoid unauthorized access to cheque books 2 factor authentication (2FA): Ensure the identity of bank customers before they can issue signature using PKI technology: Ensure the integrity of e- cheque E-cheque issuance records: Allow payer s bank to check the presented cheques against its own issuance records Centralized presentment service: Guard against duplicate presentments 8 8
Use of PKI technology in E-cheque will be using the digital certificate issued by one of the recognized Certification Authorities Two types of digital certificate can be used: General purpose or personal digital certificate Safe kept by the owner; can be used for all purposes Special purpose digital certificate Safe kept by payer s bank; can be used for and other banking services of that payer s bank 9 9
Progress made System development under way Most retail banks have indicated interest to offer service to their customers Marketing campaigns will be organised closer to the service launch It is our target to launch the service in 2H 2015! 10 10
Q & A