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ICT-enabled Investment Climate Reform – Leveraging Technology Tbilis, Georgia, June 5, 2013 Lois Quinn Senior Payment System Specialist Financial & Private.

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Presentation on theme: "ICT-enabled Investment Climate Reform – Leveraging Technology Tbilis, Georgia, June 5, 2013 Lois Quinn Senior Payment System Specialist Financial & Private."— Presentation transcript:

1 ICT-enabled Investment Climate Reform – Leveraging Technology Tbilis, Georgia, June 5, 2013 Lois Quinn Senior Payment System Specialist Financial & Private Sector Development (FPD) The World Bank B2G & P2G E-Payments

2 Government PaymentsAdoption ChallengesAlternative Approaches 2

3 Payments initiated electronically Traditional: ATM, Card-based, m-banking, e-banking Innovative: Mobile payments, Internet payments, Pre-paid cards E-Payments Business & Individuals Revenue authorities: Tax, Customs, Licensing, etc. Treasury: Comptroller, Financial Management, Budget Central Bank: Gov’t accts, Bank accts, settlement agency acct Payment service providers Stakeholders 3

4 4 Mainly cash Mainly paper-based payment instruments- cheques, payment orders Mainly electronic payment instruments such as payment cards, electronic funds transfers, etc. Government to person payments Public sector salaries13%19%69% Pensions and transfer payments31%13%56% Cash transfers and social benefits25%19%44% Person to government payments Taxes50%38%25% Utility payments56%31% Payment for services, etc.50%38%25% Government to business payments Procurement of goods and services0%38%50% Tax refunds6%31%50% Business to government payments Taxes6%56%38% Utilities19%50%38% Benefits transfers6%50%31% Payments to Government: ECA *Global Payment Systems Survey ‘10

5 5 Mainly cash Mainly paper-based payment instruments- cheques, payment orders Mainly electronic payment instruments such as payment cards, electronic funds transfers, etc. Government to person payments Public sector salaries15%33%70% Pensions and transfer payments9%30%64% Cash transfers and social benefits33%30%27% Person to government payments Taxes64%55%30% Utility payments70%42%39% Payment for services, etc.67%39%27% Government to business payments Procurement of goods and services0%64%52% Tax refunds3%58%33% Business to government payments Taxes18%70%42% Utilities27%61%45% Benefits transfers9%58%36% Payments to Government: Lower-middle income countries

6 Modernized Payment Approaches Government – Fiscal Authorities Foster greater tax compliance Cut leakage Reduce cash handling costs Reduce staffing requirements Minimize accounting errors Speed reconciliation Eliminate paper handling & storage Provide electronic record Individual & Business Payers Address inconvenience Provide electronic record Speed acct reconciliation Banks & Payment Providers Cut cash transport & handling Reduce staffing needs Eliminate paper handling Enable straight through electronic processing Foster transparency in processing fees Economic Efficiency & Prosperity Enhance business environment Encourage greater payment system efficiency Foster Retail payment system development Promote inoperability of payment services 6

7 7

8 Adoption Challenges Transaction reference information Payment receipt / confirmation for payee Payment recognition / accounting Payment process Collection organization – Consolidated / Decentralized Transaction costs 8

9 Assurance of Payment Revenue agent issues a receipt that discharges the payer of the obligation Revenue authority records account paid in full Agent issues a provisional receipt Final payment confirmation issued after check clears Revenue authority recognizes account paid in full only after check clears Payment service provider approves (declines) a payment at time of transaction request, and issues an approval confirmation number or cancels the transaction Payer is issued an electronic receipt Under contractual agreement, the payment service provider guarantees payment of the transactions it approves Revenue agent accepts (approved) e-payment as payment in full 9

10 Indicative Payment Processes Payment via Participating Bank (Option 1) Payment via a Payment Platform (Option 2) 10

11 1. 2. Participating Banks Payment file 3. Designated Settlement Bank Completion of registration process at ABC portal. The registrant is provided a Transaction Reference Number (TRN) against which payment has to be made 2.Registrant goes to participating banks and makes a payment through internet banking, mobile banking or ATM – access specifically designed screens for ABC payment– and enters TRN and authorizes debit from his/her account. Bank provides the registrant a Payment Confirmation Number (PCN) 3.End-of-day bank sends payment file with payments received against specific TRNs to designated settlement bank(s) 4.Bank submits consolidated amount through existing clearing/settlement channels 5.Settlement bank after receipt of funds from bank credits ABC’s account with the settlement bank and uploads TRN and PCN details and OCR marks the business registration process complete. > 6.Registrant is informed about completion of process by SMS/ and can also check on the ABC Portal Option

12 1. Designated Settlement Bank 1.Completion of registration process at ABC portal. > 2.ABC launches payment gateway and registrant makes payment using preferred payment method. > 3.The preferred payment service completes the standard online payment authorization process and confirms successful authorization from the registrants payment account and ABC records approval and completes registration 4.Registrant is informed about completion of process by SMS/ and can also check on the ABC Portal 5.End-of-day the payment service network sends payment file with payments received against specific TRNs to designated settlement bank 6.Payment service network submits consolidated amount through existing clearing and settlement channel 7.Settlement bank after receipt of funds from payment service network credits ABC’s account with the settlement bank and uploads TRN details 4. Payment Gateway Payment File Payment Service Network 2b. 3a. 2a.3b Option 2 12

13 Tax authority Customs Business licensing Social insurance Court fees & fines Car registration Tax authority Customs Business licensing Social insurance Court fees & fines Car registration Decentralized Consolidated Approach 13 Processes Across Government

14 Singapore Oman Government manages consolidated online portal India USA Each agency / jurisdiction manages its own payments Malaysia Private sector specialized entity 14

15 Guidelines for government payments  The World Bank, in consultation with the International Advisory Group for Government Payments (IAG), developed the “General Guidelines for the Development of Government Payments Programs”  Help governments develop a comprehensive approach to address these challenges, and others, associated with government payments, that takes into account governments broader role in national payment systems  Guidelines:  Facilitate coordination amongst stakeholders within payments value chain on a “framework-based approach” derived from international good practices and allows flexibility in implementation approaches  Not prescriptive in nature but give provisional guidance to governments and other stakeholders to address key areas of uncertainty during implementation process including a rapidly changing payments landscape  Key focus on efficiency in government payment processes and flows that utilize country’s domestic payments infrastructure 15

16 A.Safety, Efficiency and Transparency  Ensure proper program governance and risk management: Guideline 2: Review and streamline treasury processes, then work on their automation.  Review and streamline treasury processes, then work on their automation.  Take full advantage of electronic payment methods.  Create appropriate organizational arrangements to foster the continuous development of government payment programs. The General Guidelines B. Legal and Regulatory  An appropriate legal framework with specific applicability to government payment programs can further underpin their safe and efficient operation.  Laws and regulations on payment instruments and systems, competition and consumer protection can also have an important bearing on government payment programs. C.Payment Systems Infrastructure  An appropriate payments infrastructure should be in place  Maximize the potential of the available infrastructures through interoperability and widespread usage D.Cooperation & Partnerships to Leverage Govt Payment Programs  Adopt a strategic approach to the development of government payment programs  Leverage on government payment programs to promote financial inclusion 16

17 ADDITIONAL CHALLENGES 17

18 Transaction Reference Information Tax payer ID Amount paid Reference code – –Payment category (VAT tax, licensing fee, parking fine, court expenses, etc.) –Account to which the funds are being paid Program E-filing system to generate a Transaction Reference Number (TRN) 18

19 Payment authentication / processing Cash / check Payment  Paper record in triplicate Revenue authority Payment service provider Payer  Authentication Signed Stamped  Paper trail accessibility E - Payment  Electronic record Revenue Authority Payment Service Provider Payer  Authentication Digital Signature  Electronic file access 19

20 Transaction Costs Paper-based Indirect & opaque Treasury pays fee to central bank Revenue collection agency typically bears no direct transaction fee Revenue collection agency bears staffing costs & paper management costs Electronic Direct & transparent Revenue collection agency enters contractual relationship with payment service provider Revenue collection agency pays transaction fee to payment service provider In-house processing costs decline 20

21 REFERENCE SLIDES 21

22 Commercial Banks Central Bank Non-financial payments service providers Other Financial Institutions Central Govt Consolidated Account Government Revenue Messaging and Payment Systems Schematic 22 Electronic Payment Flow Payment info & confirmation P & B Payers E-File Payment Receipt / Confirmation E-Payment Order Cash Kiosk Comptroller Treasury Ledger System Budget & Financial Management Collection Authorities Cash & Check Cash Private service provider Payment info & confirmation E-filing Payment Info & Confirmation Payment Receipt / Confirmation E- Payment Order C a s h / C h e c k P a y m e n t & T r a n s p o r t Agency budget & spending info

23 Payment Modernization Lags ICT Modernization Mainly Cash Non-cash, paper-based Electronic Government to person payments Public sector salaries 11%24%76% Pensions and transfer payments 14%26%67% Cash transfers and social benefits 22%31%52% Person to government payments Taxes 40%48%44% Utility payments 55%33%42% Payment for services, etc. 54%35%34% Government to business payments Procurement of goods and services 2%50%61% Tax refunds 2%49%50% Business to government payments Taxes 11%58%57% Utilities 16%53%50% Benefits transfers 9%52%46% Source: Global Payment Systems Survey ‘10 Table 1: Survey of Payments to and from Governments 23


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