AN INTRODUCTION TO
PAYMENT SYSTEMS
DYAH N.K. MAKHIJANI
BANK INDONESIA
SEACEN Intermediate Course in Payment and
Settlement System for Emerging Economies
1.
WHAT
2.
WHO
3.
A FLAVOR OF OVERSIGHT
4.
FUTURE
AGENDA
A payment system consists of a set of
instruments, banking procedures and,
typically, interbank funds transfer
systems that ensure the circulation of
money
Source: CPSS Glossary – March 2003
DEFINITION
DEFINITION
4 WHAT
Credit
Transfer • Paper based
• Cards
based
• Electronic
based Debit
Transfer
• Clearing
Houses
• Banks
• Others
Paper based
Card based
Electronic based
• Bank
Teller
• ATM
• EDC
• Computer
• Mobile
Phones
• Others
Payment Instrument
Payment Systems Operator
Payment Systems
Payment Instruments and
Other Payment Mechanism
5 WHAT
CASH PAPER CARD
EFT
Electronic input/order from:
• Home banking system/internet
• Mobile phone
• Phone (banking)
• S/W based e-money payment
• Others PAPER
BASED TRANSFER
ORDER
• Credit Transfer Slip
• Direct Debit Order
CARD BASED TRANSFER
ORDER
• ATM • Cheque
• Draft
• Direct Debit Order
• Credit
A Bank’s Interaction with Payment
Systems & Mechanisms
6 WHAT
Commercial Bank E-money
Scheme
Credit/Debit Card System
RTGS/DNS SSSS
ATM Payments Mobile
Payment
Others Cross
Border
Internet Payment
Cheque Clearing Private
SSSS
Bulk Transfer
System Interbank
7 WHAT Commercial Bank E-money Scheme Credit/Debit Card System RTGS/DNS SSSS ATM Payments Mobile Payment
Non ACH Bill Payment Cross Border Internet Payment Cheque Clearing Private SSSS Bulk Transfer System Interbank Giro System Global Operator Domestic Operator Domestic Operator Global Operator Mobile Phone Operator ISP SWIFT Cross
Border Domestic E-money Operator Central Bank ACH / Clearing House ACH / Clearing House ACH / Clearing House Private CSD Others Billers (utility companies)
Indonesia National Payment System Blue Print - 1995
How Central Bank Perceives The Nation’s Payment Systems –
A Sample From Indonesia
8
Electronic Input - Clearing Systems
- Trading Systems Electronic
Input
-Retail
Bank Batches
Clearing House Batches
Batch
-EOD & Interim Clearing EOD Settlement
Cheque &GIRO Input
Retail Online
-EOD Settlement Real Time Clearing
Wholesale-Real Time Clearing Real Time Settlement
Back-End Switch & Clearing Card
Input
ATMs EFT/POS Teller
Input
Online High Value Clearing Settlement
System Non-Bank High Value Payments
Bank High Value Payments
Electronic Batch Clearing
Indonesia National Payment System Blue Print – 2004 Revision
9 WHAT
How Central Bank Perceives The Nation’s Payment Systems –
Payment Systems and Operators, and Payment Service Providers –
A Sample from Indonesia
10 WHO ! " # $ %& ' ( &' ) * + $ *!,-. /00 " 1 * • %!2 " • 3 • * + $ ! ,-" • 41. !&$ 1 " • . &$ * • 56
• .* &
11 WHO !" #$ %& &"!'$ ()* !(+,"$ - &+.(/) +0 -1 &+.(/) "* 2!", &$ 21 1!$
Payment Systems and Operators, and Payment Service Providers –
12 WHO 81 , 1 !1 " ,06 , * 6 ! " 9 , ,, *(!%*(" % $' 4!" ,0 , 6 !"
8( , 1 !(" !" !" !" !" #$ #$ #$ #$ % % % % 7 :; 1 $' " " " " #$ #$ #$ #$
Payment Systems and Operators, and Payment Service Providers –
13 WHO !" # $% &' &'&%' !%(( )# * +%', '-,&% +# # ./&% + % /& +$!% + % ! +0*% + % *!
Payment Systems and Operators, and Payment Service Providers –
14 WHO !" # $ #
Payment Systems and Operators, and Payment Service Providers –
15 WHO
Banks through their credit card products, e.g. Citibank One Bill
Bill Payments for billers such as telecom/mobile phone operators, public utilities, Cable TV, ISP, insurance, etc. Bill Payments
(Host to Host linkage between banks and billers) -Under development: 1. Banks
2. Mobile Phone Operators 3. Other Non-Bank-Non
Financial Institutions Micro/Retail/Small Payments replacing cash Multi Purpose Stored Value Cards
Payment Systems and Operators, and Payment Service Providers –
Players in Payment Systems
and Payment Service Providers
16 WHO
Evolving to become provider of MPSVC Other Companies
8
Provide payment related services
(FEDC), Evolving to become provider of MPSVC
Mobile Phone Operators 7
Provide remittance services Postal / Remittance Companies
6
Operate (SWIPS & Non SWIPS) Global / Domestic Payment
System Operator / Principal 5
PS operator, member of payment system
NBFI 4
PS operator, member of payment system
Commercial Banks 3
Regulate (PS related issues, e.g. competition, licensing of certain payment providers)
Other Authorities 2
Regulate, Oversee, Operate (SIPS) Central Bank
Relationship Among Players
– Clear Cut Interaction
17 WHO
Central Bank
RTGS System
Bank
Other Authorities
Non Bank Institution Supervision
• Regulation • License •Supervision
Member • Develop
• Operate • Oversee
Relationship Among Players –
Not So Clear Cut Interaction
18 WHO
Central Bank
Domestic Principals
Global
Principals Members
Other Authorities
?
?
?
?
?
?
Relationship Among Players –
Not So Clear Cut Interaction
19 WHO
Central Bank
Domestic Switching Companies
Visa International
Card Issuing Bank
Other Authorities
Card Issuing NBFI
Supervision
?
?
?
• Regulation • Supervision
Member
Member
License
Member
Relationship Among Players – Not So Clear Cut Interaction - Indonesia Case Study
20 WHO
Central Bank
Domestic Principals
Visa Regional
Office
Card Issuing NBFI
Other Authorities
Coordination
A Challenge in Oversight Close
Coordination
Close Coordination
A central bank task, principally intended to promote
the smooth functioning of payment systems and to
protect the financial system from possible ‘domino
effects’ which may occur when one or more
participants in the payment system incur credit or
liquidity problems. Payment systems oversight aims
at a given system (e.g. a funds transfer system)
rather than individual participants
Source: CPPS glossary – March 2003
•
Systemically Important Payment System (SIPS) – CP SIPS• System Wide Important Payment System (SWIPS)
• Which SWIPS ? What criteria ?
• Which CP’s ?
• The extent of central bank oversight – points to ponder:
• Oversight of Payment Service Providers?
• What criteria ?
• What objective ?
• Which CP’s ?
Payment System Oversight
What Do We See In
The Horizon
23 FUTURE
What Do We See In
The Horizon
24
FUTURE
A
S
t
o
r
m
y
S
e
a
• Instruments
• The rise of e-money
• Uprising of card fraud and crime
• Enormous costs of chip card migration • Issuers
• The growth of non-bank and non-financial institutions offering Payment Systems – a direct competitor to banks
• Interoperability
• Difficulty to bring competitors together • Legal Robustness of Payment Systems
• Legality of e-payment and electronic proofs
• Strong movement in consumer protection and counter terrorism • Central Bank Oversight
• A challenge of scope and coordination
• In the wake of “FSA” central banks may need to revisit their oversight mechanism
What Do We See In
The Horizon
• Banking Infrastructure
• Large capital expenditure for infrastructure puts forces to banks for
building shared infrastructure both for back-end and front-end, requiring new linkage to payment system
• Bussiness Continuity Planning
• Natural disasters
• Pandemi/epidemi
What Do We See In
The Horizon
