Measuring Payment System Development Cape Town, April 7th, 2009 Jose Antonio Garcia Payment Systems Development Group
Background, Rationale and Purpose for obtaining Payment Systems Indicators Requested by World Bank Senior Management An improved framework for Monitoring & Evaluation A key purpose is to ensure WB s assistance and resources will focus in those regions and countries where such assistance is needed the most The exercise also intends to provide central banks, in particular in developing countries, with a tool to monitor developments in their payments systems and to compare them with other countries - a need expressed to the PSDG on many occasions
General Methodology Based on the answers to the World Bank s Global Payment Systems Survey 2008 For each individual area subject to measurement, the sample of countries is divided, according to results, in four levels of development (similar to the FSAP program) Providing a ranking of individual countries was not considered in this iteration, but might be included for the next exercise
General Methodology The methodology to calculate the various levels of payment system development, developed by PSDG, is presented as Chapter 1 in the publication (now available at www.worldbank.org/paymentsystems) Tables containing the answer of all countries to each of the questions presented in the Global Survey were published as an appendix to Payment Systems Worldwide: a Snapshot (WB, 2008) Therefore, in principle anybody would be able to draw their own conclusions as to the relative ranking of each country
Payment System Sub-components being Measured 1. Legal and Regulatory Framework for Payment Systems, Payment Instruments, and Oversight 2. Large-value Payment Systems 3. Retail Payment Systems 4. The enabling environment for the Payment System Oversight function
Rationale behind the grading system for each of the Areas for Measurement 1. Legal and Regulatory Framework for Payment Systems, Payment Instruments, and Payment System Oversight CPSS Core Principles Principles I and II 2. Large-value Payment Systems CPSS Core Principles Principles III through X 3. Retail Payment Systems Composed of various sub-indicators (see next slides) 4. Actual Deployment and Performance of the Payment System Oversight Function CPSS Core Principles Central Bank Responsibilities in Applying the Core Principles
Area 1: Legal and Regulatory Framework for Payment Systems, Payment Instruments and Oversight
Area 1: Legal and Regulatory Key legal concepts covered by the existing legal framework Finality, bilateral and multilateral netting, non-existence of zero-hour rule, protection of securities pledged in a payments system, electronic processing of payments, etc. Central Bank Legal Powers to Oversee Payment Systems Formal powers for Oversight? Explicit vs. Implicit and how this is developed in regulations. Scope given by law, etc.
Key Payment Systems Concepts covered in the Legal Framework (% of countries that answered positively to each item) Protection of collateral pledged in payment systems Enforceability of security interests in repos/pledged collateral No existence of zero hour rules Electronic processing of payments Bilateral and multilateral netting Settlement finality 0 10 20 30 40 50 60 70 80 90 9
Legal Powers for Oversight 60% 50% 50% 47% 40% 30% 20% 8% 10% 0% No Formal Powers Powers IMPLICIT Powers EXPLICIT Figures do not add-up to 100% as some countries checked both no formal powers and implicit powers
Large-Value Payment Systems
Area 2: Large Value Payment Systems Two sub-components measured independently Sub-Component 1: System Design and Key Policy Decisions that Affect the Safety, Soundness and Efficiency of the System. Issues covered: Liquidity Risks Credit Risks for Operator/Intraday Liquidity Provider Resilience and Business Continuity Access Rules and Policies System Governance * Special Procedure for Large-Value Cheques (only to be applied when no RTGS system is in place)
System(s) used for Large-value Payments 100% 80% 60% 40% 20% 0% Highest World Lowest 100% 79% 67% EU-15 LAC, 33% SA 34% EU-15, EU-NM 40% SA EAP 17% 7% 0% RTGS Cheques Other AFR
Area 2: Large Value Payment Systems (cont.) Sub-Component 2: Actual Usage of the System being rated versus other Systems (e.g. cheques, manual or semi-manual gross systems) that process Large- Value Payments No classification of countries is made as part of this sub-component Maps only show share of RTGS vs. other systems
Value Settled through RTGS Systems in 2006: Turnover of GDP (times, simple average by region) 80 70 60 50 40 30 20 10 0 76 55 21 20 6 7 9 5 3 ECA EU-15 EU-NM ODC EAP LAC MENA SA SSA
Area 3: Retail Payment Instruments and Systems
Area 3: Retail Payment Systems Two sub-components measured independently Sub-Component 1: Deployment of Infrastructure to process Retail Payment Instruments and Key Policy Decisions that Affect the Safety, Soundness and Efficiency of the Services Provided. Issues considered: ACH infrastructure and (some) Cheque Clearinghouse Features POS terminals infrastructure Interoperability of Infrastructure Scope of Payment System Oversight
2,500 Payment Cards* In Circulation per 1000 inhabitants (as of end-2006) 2,405 2,000 1,647 1,500 1,000 500 819 143 379 492 530 421 77 0 EU-15 EU-NM ODC AFR EAP ECA LAC MNA SA *Includes debit cards, credit cards, and other non-prepaid products ** Simple average *** For Africa, if South Africa and Mauritis are excluded the number is then 51
POS Terminals per 1 million inhabitants (as of end-2006) 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 18,419 9,495 18,812 1,291 1,693 3,181 3,626 2,445 EU-15 EU-NM ODC AFR EAP ECA LAC MNA SA * Simple average ** For Africa, if South Africa and Mauritis are excluded the number is then 184 312
Interoperability of ATMs and POS Interoperability of ATMs Interoperability of POS Terminals Full Partial Low Full Partial Low Central Bank Opinions # % # % # % # % # % # % Worldwide totals (128) 67 52% 34 27% 15 12% 65 51% 29 23% 20 16% European Union-15 (15) 12 80% 3 20% 0 0% 15 100 0 0% 0 0% EU-Newer members (12) 9 75% 3 25% 0 0% 10 83% 1 8% 1 8% Other Developed C. (14) 11 79% 1 7% 1 7% 10 71% 3 21% 0 0% Europe - Central Asia 16 4 25% 10 63% 1 6% 4 25 9 56% 2 13% East Asia and Pacific (10) 4 40% 1 10% 3 30% 0 0% 3 30% 5 50% Latin America & Caribbean 23 11 48% 5 22% 5 22% 11 48% 6 26% 3 13% Middle East & North Africa (12) 8 67% 2 17% 0 0% 5 42% 4 33% 1 8% South Asia (6) 2 33% 1 17% 2 33% 2 33% 0 0% 3 50% Sub-Saharan Africa (20) 6 30% 8 40% 3 15% 8 40% 3 15% 5 25%
Area 3: Retail Payment Systems (cont.) Sub-Component 2: Efficiency of payment instruments used, and extensiveness of usage of cashless payment instruments. Specific issues considered: Extensiveness of usage of cashless instruments Efficiency of payment instruments used: electronic instruments vs. paper-based instruments
Non-cash retail payment transactions per capita for year 2006 250 200% 181% 215.1 180% 200 160% 175.1 140% Number of transactions 2006 150 100 40% 45% 41% 61% 55.6 120% 100% 80% 60% Growth Rate 2006 vs. 2004 50 24% 9.6 22.4 11.6 4.9 4.7 2.1 18% 39% 11% 40% 20% 0 East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Sub-Saharian Africa European Union 15 EU Newer Members Other Developed Countries 0% Regions
Statistical Trends* Instrument % of total non-cash payments (in terms of volume) Change in volume 2006 vs. 2002 Average value of each payment (in US$, year 2006) Cheques World: 22% Developing: 43% World: 0% Developing: 11% World: $5,009 Retail electronic credit transfers World: 15% Developing: 21% World: 123% Developing: 107% World: $3,435 Direct debits World: 11% Developing: 2% World: 108% Developing: 55% World: $588 Payments with debit cards World: 35% Developing: 30% World: 199% Developing: 388% World: $68** Payments with credit cards World: 17% Developing: 4% World: 173% Developing: 471% World: $100 *Preliminary calculations for Developing Countries **Simple average for both World and Developing Countries *** For some countries, the value reported for debit cards included both debit cards and credit cards transactions
Area 4: The Enabling Environment for the Payment System Oversight
Area 4: Payment System Oversight Looks at the enabling environment for Central Banks to perform the oversight function (may not necessarily capture the quality of an oversight program) Issues covered: Organizational Arrangements for Payment System Oversight Clarity of the Objectives of Payment System Oversight Cooperation with other relevant Authorities Cooperation with other stakeholders
Organizational Arrangements: World Figures 90% 72% 78% 66% 60% 30% 0% Oversight Function Established in Practice Specific Unit for Oversight Oversight Function separated from Operations
Objectives of Oversight: World Figures 90% 72% 70% 63% 60% 32% 30% 0% Oversight Function established in practice Objectives set down in regulation/policy document Objectives include only "safety" and "efficiency" Objectives also include competition, consumer protection, others
Cooperation with other Authorities: World Figures 50% 40% 40% 45% 30% 20% 9% 10% 0% No significant cooperation Ad-hoc and informal Cooperation Cooperation through MOU or similar
PPP Goals Thank you! Jose Antonio Garcia jgarciagarcialun@worldbank.org Payment Systems Development Group The World Bank www.worldbank.org/paymentsystems