ProdukHukum BankIndonesia
AN INTRODUCTION TO
PAYMENT SYSTEMS
DYAH N.K. MAKHIJANI
BANK INDONESIA
SEACEN Intermediate Course in Payment and
Settlement System for Emerging Economies
Jakarta - June, 2006
2
AGENDA
1. WHAT
2. WHO
3. A FLAVOR OF OVERSIGHT
4. FUTURE
WHAT
DEFINITION
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
3
WHAT
DEFINITION
Payment
Instrument
Credit
Transfer • Paper
based
• Cards
based
Debit
Transfer
Payment
Systems
Payment
Systems
Operator
• Bank
Teller
Paper
based
• Clearing
Houses
Card
based
• Electronic
based
• Banks
• Others
Electronic
based
Delivery
Channels
• ATM
• EDC
• Computer
• Mobile
Phones
• Others
4
Payment Instruments and
Other Payment Mechanism
CASH
PAPER
CARD
• Cheque
• Credit
• Draft
• Debit
• Direct Debit Order
• MPSVC
PAPER
BASED
TRANSFER
ORDER
CARD
BASED
TRANSFER
ORDER
• Credit Transfer Slip
• ATM
• Direct Debit Order
WHAT
EFT
Electronic input/order
from:
•
Home banking
system/internet
•
Mobile phone
•
Phone (banking)
•
S/W based e-money
payment
•
Others
5
A Bank’s Interaction with Payment
Systems & Mechanisms
E-money
Scheme
RTGS/DNS
SSSS
WHAT
Private
SSSS
Cheque
Clearing
Cross
Border
Internet
Payment
Interbank
Giro
System
Commercial
Bank
Bulk
Transfer
System
Mobile
Payment
ATM
Payments
Credit/Debit
Card System
Others
6
A Bank’s Interaction with Payment
Systems & Mechanisms
Cross
Border
Central
Bank
E-money
Operator
Domestic
SWIFT
E-money
Scheme
Others
ISP
Mobile
Phone
Operator
WHAT
Private
CSD
RTGS/DNS
SSSS
ACH /
Clearing
House
Private
SSSS
Cross
Border
Cheque
Clearing
Commercial
Bank
Internet
Payment
Interbank
Giro
System
Mobile
Payment
ATM
Payments
Credit/Debit
Card System
Non ACH Bill
Payment
Domestic
Operator
Global
Operator
Domestic
Operator
Global
Operator
ACH /
Clearing
House
Bulk
Transfer
System
Billers
(utility companies)
ACH /
Clearing
House
7
WHAT
How Central Bank Perceives The
Nation’s Payment Systems –
A Sample From Indonesia
Indonesia National Payment System Blue Print - 1995
Retail Online EOD Settlement
Real Time Clearing
Wholesale-
Batch EOD & Interim Clearing
EOD Settlement
Card
Input
Teller
Input
Electronic
Input
- Retail
Cheque
&GIRO
Input
ATMs
EFT/POS
Bank
Batches
Clearing House
Batches
Back-End Switch &
Clearing
Electronic Batch
Clearing
Real Time Clearing
Real Time Settlement
Electronic Input
- Clearing Systems
- Trading Systems
Non-Bank High
Value Payments
Bank High Value
Payments
Settlement
System
Online High
Value Clearing
8
How Central Bank Perceives The
Nation’s Payment Systems –
A Sample From Indonesia
Indonesia National Payment System Blue Print – 2004 Revision
WHAT
9
Payment Systems and Operators, and
Payment Service Providers –
A Sample from Indonesia
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Payment Systems and Operators, and
Payment Service Providers –
A Sample from Indonesia
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Payment Systems and Operators, and
Payment Service Providers –
A Sample from Indonesia
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12
Payment Systems and Operators, and
Payment Service Providers –
A Sample from Indonesia
WHO
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13
Payment Systems and Operators, and
Payment Service Providers –
A Sample from Indonesia
WHO
#
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14
Payment Systems and Operators, and
Payment Service Providers –
A Sample from Indonesia
Multi Purpose
Stored Value
Cards
Micro/Retail/Small
Payments
replacing cash
Under development:
1. Banks
2. Mobile Phone Operators
3. Other Non-Bank-Non
Financial Institutions
Bill Payments
(Host to Host
linkage between
banks and
billers)
Bill Payments for
billers such as
telecom/mobile
phone operators,
public utilities,
Cable TV, ISP,
insurance, etc.
Banks through their credit
card products, e.g. Citibank
One Bill
WHO
15
Players in Payment Systems
and Payment Service Providers
WHO
1
Central Bank
Regulate, Oversee, Operate (SIPS)
2
Other Authorities
Regulate (PS related issues, e.g.
competition, licensing of certain
payment providers)
3
Commercial Banks
PS operator, member of payment
system
4
NBFI
PS operator, member of payment
system
5
Global / Domestic Payment
System Operator / Principal
Operate (SWIPS & Non SWIPS)
6
Postal / Remittance Companies
Provide remittance services
7
Mobile Phone Operators
Provide payment related services
(FEDC), Evolving to become provider of
MPSVC
8
Other Companies
Evolving to become provider of MPSVC
16
Relationship Among Players
– Clear Cut Interaction
WHO
Supervision
Central
Bank
Other
Authorities
• Develop
• Operate
• Oversee
RTGS
System
Member
Bank
Member
Non Bank
Institution
• Regulation
• License
•Supervision
17
WHO
Relationship Among Players –
Not So Clear Cut Interaction
?
Central
Bank
?
? ?
?
Other
Authorities
Global
Principals
Domestic
Principals
?
Members
?
?
18
Relationship Among Players –
Not So Clear Cut Interaction
WHO
• Regulation
• Supervision
Central
Bank
?
Visa
International
Member
Card Issuing
Bank
Member
Card Issuing
NBFI
?
?
?
Other
Authorities
Domestic
Switching
Companies
Member
License
Supervision
?
19
Relationship Among Players – Not So Clear
Cut Interaction - Indonesia Case Study
WHO
Voluntary
Reporting
Central
Bank
Coordination
Close
Coordination
Other
Authorities
Close
Coordination
Visa
Regional
Office
Card Issuing
NBFI
Domestic
Principals
A Challenge in Oversight
20
Payment System Oversight
OVERSIGHT
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
21
OVERSIGHT
Payment System Oversight
•
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 ?
22
What Do We See In
The Horizon
A Quiet Ocean ?
FUTURE
23
What Do We See In
The Horizon
A S to r m y S e a ?
FUTURE
24
What Do We See In
The Horizon
•
•
FUTURE
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
25
What Do We See In
The Horizon
•
FUTURE
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
26
27
PAYMENT SYSTEMS
DYAH N.K. MAKHIJANI
BANK INDONESIA
SEACEN Intermediate Course in Payment and
Settlement System for Emerging Economies
Jakarta - June, 2006
2
AGENDA
1. WHAT
2. WHO
3. A FLAVOR OF OVERSIGHT
4. FUTURE
WHAT
DEFINITION
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
3
WHAT
DEFINITION
Payment
Instrument
Credit
Transfer • Paper
based
• Cards
based
Debit
Transfer
Payment
Systems
Payment
Systems
Operator
• Bank
Teller
Paper
based
• Clearing
Houses
Card
based
• Electronic
based
• Banks
• Others
Electronic
based
Delivery
Channels
• ATM
• EDC
• Computer
• Mobile
Phones
• Others
4
Payment Instruments and
Other Payment Mechanism
CASH
PAPER
CARD
• Cheque
• Credit
• Draft
• Debit
• Direct Debit Order
• MPSVC
PAPER
BASED
TRANSFER
ORDER
CARD
BASED
TRANSFER
ORDER
• Credit Transfer Slip
• ATM
• Direct Debit Order
WHAT
EFT
Electronic input/order
from:
•
Home banking
system/internet
•
Mobile phone
•
Phone (banking)
•
S/W based e-money
payment
•
Others
5
A Bank’s Interaction with Payment
Systems & Mechanisms
E-money
Scheme
RTGS/DNS
SSSS
WHAT
Private
SSSS
Cheque
Clearing
Cross
Border
Internet
Payment
Interbank
Giro
System
Commercial
Bank
Bulk
Transfer
System
Mobile
Payment
ATM
Payments
Credit/Debit
Card System
Others
6
A Bank’s Interaction with Payment
Systems & Mechanisms
Cross
Border
Central
Bank
E-money
Operator
Domestic
SWIFT
E-money
Scheme
Others
ISP
Mobile
Phone
Operator
WHAT
Private
CSD
RTGS/DNS
SSSS
ACH /
Clearing
House
Private
SSSS
Cross
Border
Cheque
Clearing
Commercial
Bank
Internet
Payment
Interbank
Giro
System
Mobile
Payment
ATM
Payments
Credit/Debit
Card System
Non ACH Bill
Payment
Domestic
Operator
Global
Operator
Domestic
Operator
Global
Operator
ACH /
Clearing
House
Bulk
Transfer
System
Billers
(utility companies)
ACH /
Clearing
House
7
WHAT
How Central Bank Perceives The
Nation’s Payment Systems –
A Sample From Indonesia
Indonesia National Payment System Blue Print - 1995
Retail Online EOD Settlement
Real Time Clearing
Wholesale-
Batch EOD & Interim Clearing
EOD Settlement
Card
Input
Teller
Input
Electronic
Input
- Retail
Cheque
&GIRO
Input
ATMs
EFT/POS
Bank
Batches
Clearing House
Batches
Back-End Switch &
Clearing
Electronic Batch
Clearing
Real Time Clearing
Real Time Settlement
Electronic Input
- Clearing Systems
- Trading Systems
Non-Bank High
Value Payments
Bank High Value
Payments
Settlement
System
Online High
Value Clearing
8
How Central Bank Perceives The
Nation’s Payment Systems –
A Sample From Indonesia
Indonesia National Payment System Blue Print – 2004 Revision
WHAT
9
Payment Systems and Operators, and
Payment Service Providers –
A Sample from Indonesia
6HWWOHPHQW
•
•
5 6
.* &
'!* 7
"
WHO
*
•
•
•
•
•
%
!2
"
3
)
*
+
$
!
,-"
4 1.
!&$
1
"
.
&$
*
*
+
$
*
!,-.
/00
"
1
! "
# $
%& '
( & '
10
Payment Systems and Operators, and
Payment Service Providers –
A Sample from Indonesia
2
1
1
!
$
"
*
2
!",
&
$
+ 0
WHO
-
1
&+.(/)
-
&+.(/)
(
)*
!(+,"$
%&
&"!
'$
!" #$
11
Payment Systems and Operators, and
Payment Service Providers –
A Sample from Indonesia
"
#$
1
$'
!"
#$
%
:;
7
1
!("
8
(
,
6 ! "
,0
,
4! "
WHO
% $ '
*(!%*("
,,
9
,
6
! "
,0
6
,
*
1
!1 "
8
1
,
12
Payment Systems and Operators, and
Payment Service Providers –
A Sample from Indonesia
WHO
*!
+0*
%
+
%
!
+$!
%
+
%
/&
./&
%
+
%
#
+#
'
-,&
%
+
%',
$
%
&'
!
% ((
)#
*
&'&
%
'
#
!
"
13
Payment Systems and Operators, and
Payment Service Providers –
A Sample from Indonesia
WHO
#
$
#
! "
14
Payment Systems and Operators, and
Payment Service Providers –
A Sample from Indonesia
Multi Purpose
Stored Value
Cards
Micro/Retail/Small
Payments
replacing cash
Under development:
1. Banks
2. Mobile Phone Operators
3. Other Non-Bank-Non
Financial Institutions
Bill Payments
(Host to Host
linkage between
banks and
billers)
Bill Payments for
billers such as
telecom/mobile
phone operators,
public utilities,
Cable TV, ISP,
insurance, etc.
Banks through their credit
card products, e.g. Citibank
One Bill
WHO
15
Players in Payment Systems
and Payment Service Providers
WHO
1
Central Bank
Regulate, Oversee, Operate (SIPS)
2
Other Authorities
Regulate (PS related issues, e.g.
competition, licensing of certain
payment providers)
3
Commercial Banks
PS operator, member of payment
system
4
NBFI
PS operator, member of payment
system
5
Global / Domestic Payment
System Operator / Principal
Operate (SWIPS & Non SWIPS)
6
Postal / Remittance Companies
Provide remittance services
7
Mobile Phone Operators
Provide payment related services
(FEDC), Evolving to become provider of
MPSVC
8
Other Companies
Evolving to become provider of MPSVC
16
Relationship Among Players
– Clear Cut Interaction
WHO
Supervision
Central
Bank
Other
Authorities
• Develop
• Operate
• Oversee
RTGS
System
Member
Bank
Member
Non Bank
Institution
• Regulation
• License
•Supervision
17
WHO
Relationship Among Players –
Not So Clear Cut Interaction
?
Central
Bank
?
? ?
?
Other
Authorities
Global
Principals
Domestic
Principals
?
Members
?
?
18
Relationship Among Players –
Not So Clear Cut Interaction
WHO
• Regulation
• Supervision
Central
Bank
?
Visa
International
Member
Card Issuing
Bank
Member
Card Issuing
NBFI
?
?
?
Other
Authorities
Domestic
Switching
Companies
Member
License
Supervision
?
19
Relationship Among Players – Not So Clear
Cut Interaction - Indonesia Case Study
WHO
Voluntary
Reporting
Central
Bank
Coordination
Close
Coordination
Other
Authorities
Close
Coordination
Visa
Regional
Office
Card Issuing
NBFI
Domestic
Principals
A Challenge in Oversight
20
Payment System Oversight
OVERSIGHT
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
21
OVERSIGHT
Payment System Oversight
•
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 ?
22
What Do We See In
The Horizon
A Quiet Ocean ?
FUTURE
23
What Do We See In
The Horizon
A S to r m y S e a ?
FUTURE
24
What Do We See In
The Horizon
•
•
FUTURE
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
25
What Do We See In
The Horizon
•
FUTURE
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
26
27