1. E-PAYMENT AND THEIR IMPACT IN ACCELERATING e-GOVERNMENT by Dr. Nagwa El- Shenawi Egypt nagwash@idsc.net.eg October 2004 “Definitions, Benefits & Business Models”

2. Presentation Map I II E-Payment Evolution in Arab Region III E-Government Benefits IV Recommendation & Policy Implications for Arab Countries E-Payment accelerate E-Government

3. Part II. E-Payment Evolution in Arab Region 1.2 Market Structure 1.3 Global Brand Market Share. 1.4 Performance Indicators (Inter. / Regional). 1.5 Ranking among Arab Countries. 1.6 E-Commerce in Arab Countries. 1.7 Major challenges. 1.1 Basic Concepts

4. E-Payment The e-payment card is a widely recognized banking instrument for meeting obligations, and it is accepted on the international and local levels, whether by individuals, merchants or banks as a cash- alternative. The card is used to pay against commodities and services provided to the cardholder. Credit Card A plastic card that with a coded magnetic stripe that entitles its bearer to a revolving line of credit, whose size and interest rate are determined by the borrower’s income and credit report.

5. 1.1 Basic Concepts (Cont’d) A bank card with direct access to a card holder’s account, usually a current or savings account. The card acts like a check with the money withdrawn from the existing account balance. The withdrawal of funds is immediate with online debit cards, delayed a day or two with offline debit cards. Debit Card This card is used as a way of financing, but to a limited time period not morethan a month (buy now, pay now). The cardholder has to pay his/her debts totallyby the end of the month. Charge cards: It is a suitable method of accessing current and saving accounts (24 hours a day).The main role of these cards is the easiness of cash withdrawal and other financialand non- financial transactions. The ability of this card to perform at its optimumdepends mainly on the growth of the national, regional and international ATMnetworks. ATM cards:

6. 1.2 Arab Region Market Structure Year GDV* $bn Gross Transaction (million) Cards No. (million) MerchantsP.O.S 199814584427225202445 199922945420592 249585 2000281286426274278390 2001351708455019308367 20024523410492333368291 20035730912506500415064 2004**7240814521188467777 Source: Visa International, MasterCard.*GDV = Gross dollar value. ** estimated

7. 1.2 Egypt Market Structure (2003)-cont’d ATM Machines749 ATM Machines 749 Total No. of Cards1100 000 Total No. of Cards 1100 000 P.O.S. P.O.S. 16117 Credit & Debit Cards(issued abroad) 300 000 + Credit & Debit Cards 750 000 + Internet Cards 50 000

8. 1.3 Global Brand Market Share in Egypt 54% Visa International 41% MasterCard 3% American Express 2% Dinners Club Source: Nilson Report, 2003

9. 1.4 Performance Indicators Year GDV/Transaction($) GDV/card ($) Gross transactions/card No.) Int.RegionInt.RegionInt.Region 199879245202637352515 199977236212045162719 200076221222345632921 200174205220941723020 200276194231845683124 Arab Region Vs International level Source: Computed by Researcher based on Visa & Master’data

10. 1.4 Performance Indicators-cont’d Year GDV/Transaction($) GDV/card ($) Gross transactions/card No.) RegionEgyptRegionEgyptRegionEgypt 1998245226373527221512 1999236255451641541916 2000221228456332332114 2001205175417222812013 2002194178456823372413 Egypt Vs Arab Region level Source: Computed by Researcher based on Visa & Master’data

11. 1.5 Ranking Among Arab Countries Ranking of Arab Countries by No. of Cards $ million Source: Visa & MasterCard, 2002 Oman Egypt

12. 1.5 Ranking Among Arab Countries(Cont’d) Ranking of Arab Countries by Value of Transaction (Purchases) bn $ Source: Visa & MasterCard, 2002

13. 1.5 Ranking Among Arab Countries(Cont’d) Ranking of Arab Countries by Value of Transaction (Cash) bn$ Source: Visa & MasterCard, 2002

14. Ranking of Arab Countries by Volume of Transaction (Purchases) 1.5 Ranking Among Arab Countries(Cont’d) 000 Source: Visa & MasterCard, 2002

15. Ranking of Arab Countries by Volume of Transaction (Cash) 000 1.5 Ranking Among Arab Countries(Cont’d ) Source: Visa & MasterCard, 2002

16. Total Population, Total Number of Cards, Cards/1000 people Country Total Population Number of credit cards Cards per 1000 people Egypt.65,200,000750,00011.5 UAE.3,000,0001,638,235469 Saudi Arabia.21,400,0002,444,214106 Morocco.29,200,0001,205,74441 Tunisia.9,700,000200,59921 Bahrain.500,000207,982416 Jordan.5,000,000949,951185 Kuwait.2,000,0001,313,760669 Lebanon.4,400,000331,14075 Oman.2,500,000625,966250 Qatar.960,000161,9326 1.5 Ranking Among Arab Countries(Cont’d) Source: World Development Indicators, Visa & MasterCard 2002

17. 1.6 E-Commerce in Regions Regions Value of e-commerce ($) % United States.3.2 trillion46.4% Asia Pacific.1.6 trillion23.2% Western Europe.1.5 trillion21.7% Latin America.82 billion1.2% Eastern Europe, Africa, Middle East. 68.6 billion0.9% Others.450 billion6.6% Source: Forrester Research, Inc., 2004

18. 1.6 E-Commerce in Arab Countries (Cont’d) E- Commerce in Arab Countries Countries No. of internet users Annual Average spending ($) Value of e- Commerce ($) Emirates.976,000221001,078 million Kuwait.200,00018270182.7 million Saudi Arabia.300,0008460126.9 million Egypt.1,000,000153076,5 million Lebanon.300,000401060.15 million Oman.120,000830049.8 million Tunisia.400,000207041.4 million Qatar40,0002010040.2 million Bahrain.47,0001510035.49 million Morocco.400,000119023,8 million Jordan.212,000175018,55 million Source: Computed by the researcher based on World Development Indicators data, 2003

19. 1.7 Major Challenges facing EPC Lack of Legal Framework Lack of Credit Information (Credit Bureau) Lack of Efficient E-Payment Policy and Management Major Challenges Inadequate Telecommunication Infrastructure

20. Part II. E-Government Benefits 2.1 Definition 2.2 Requirements 2.3 Benefits 2.4 Scenarios 2.5 Challenges

21. 2.1 E-Government Definition Providing public services and transactions in an electronic format (Business –Citizens) Issuing ID card Issuing Passport Issuing or Renewing Driving Licenses Issuing birth Certificate Utilities Tax and Customs Tariffs Visa

22. Digital Signature Internet Services E-Payment Major Requiremen ts Telecommunication Infrastructure 2.2 E-Government Environment Skilled H/R

23. 2.3 E-Government Advantages E-government provide benefits for Gov., businesses and citizens from three different axes: Cost reduction and efficient processes Increasing Performance Data Accuracy Diminishing administrative procedures Best usage of H/R

24. 2.3 E-Government Advantages- cont’d Excellent Public Services Availability Accessibility Usability Business Growth Attract Investment Create job opportunities Citizen Satisfaction

25. 2.4 E-Government Scenarios E-government can take more than one scenarios from the following: Scenario 1: Telephone and Fax Scenario 2: PC and Internet Scenario 3: Both

26. 2.5 E-Government Challenges Applying E-government need to deal with the following challenges: Change Management Reengineering government Processes E-Payment Tools (e-gov card, internet card…) Technology Evolution Public Private Partnership Privacy Security

27. Part III. E-Payment Accelerate E-Government 3.1 E-Payment Impact on E-Government 3.2 Models /Case Studies

28. 1.Efficiency & Effectiveness: 2.Improving Transparency: 3.Decreasing bribery and criminal activities 4.Increasing Revenues & Increasing Liquidity in Banks. 5.Best use of Human Resource. 3.1 E-Payment Impact on E-Government

29. 3.2 Models /Case Studies Chile’s Case Study Recognizing the potential benefits of IT, the Chilean Government established a Communications and Information Technology Unit (UTIC) in 1998. The UTIC was particularly successful in pushing forward a comprehensive reform of its procurement system. Chile's experience with e-procurement has made business opportunities with the Chilean Government more transparent, reduced firms' transaction costs, increased opportunities for feedback and cooperation between firms and public agencies, and sharply reduced opportunities for corruption.

30. 3.2 Models /Case Studies- Cont’d Chile’s Case Study The efficiency gains of the new system would reach (at a minimum) $200 million per year, which is equivalent to 1.38% of the central government's total expenditures; 26.18% of 1997's Public Housing expenditure; or 11.94 times the total expenditure on employment programs in 1997. This finding was sufficient to gain the support of the Budget Office.

31. 3.2 Models /Case Studies- Cont’d Philippine’s Case Study In 1995, the Customs authority in Philippines decided to implement a new IT based system for payment, clearance processing and shipment release from Customs control. Diversion of duty and tax payments through the banking system was a serious problem, as were the number of instances when Customs collecting officers ran away with their collections. Another major concern was the unduly long clearance time taken to clear the cargo. The process involved nearly 10 separate documents in multiple copies, that passed through several desks being logged into 20 registers. Over 90 steps and more than 40 signatures and initials were involved. As a consequence, surveys consistently named the Customs Bureau as one of the most bureaucratic and corrupt government offices.

32. 3.2 Models /Case Studies- Cont’d Philippine’s Case Study In 1995, the Customs authority in Philippines decided to implement a new IT based system for payment, clearance processing and shipment release from Customs control. Diversion of duty and tax payments through the banking system was a serious problem, as were the number of instances when Customs collecting officers ran away with their collections. Another major concern was the unduly long clearance time taken to clear the cargo. The process involved nearly 10 separate documents in multiple copies, that passed through several desks being logged into 20 registers. Over 90 steps and more than 40 signatures and initials were involved. As a consequence, surveys consistently named the Customs Bureau as one of the most bureaucratic and corrupt government offices.

33. 3.2 Models /Case Studies- Cont’d Philippine’s Case Study Improved service was a major benefit. Quick clearance of a majority of transactions has brought down the cost of trade significantly. Cargo is released between four hours to two days, as opposed to eight days in the earlier system. Under the new system, business people also enjoy the greater convenience of making payments at familiar banks, instead of lining up for service at the Customs collection stations

34. South Korea Case Study Introduce number of measure to encourage card use, including mandating acceptance at all businesses with a turnover of more than $18000 a year and discounts on tax payable by businesses and individuals that used payment cards. In 1998, when the programme was launched, the tax take was $46 bn-14% of GDP. By 2001, the figures has risen to $76 billion and 17% of GDP. 3.2 Models /Case Studies- Cont’d

35. Moscow Case Study The Moscow Social Card demonstrated social impact and economic benefits. All 2.3 million Moscow residents who receive social benefits- students, pensioners, members of the armed forces, are being given chip card. The card currently includes metro ticketing, health and medical insurance details, as well as giving access to pension payments, government subsidies and discounts in specified retailers. Moscow is expected to cut the cost of administering and reduce fraud. It is already seeing success in this area, with a $30 million reduction in fraud city’s student travel pass and 20% increase in revenue by Moscow Metro. 3.2 Models /Case Studies- cont’d

36. UK Case Study UK government is moving all basic purchasing and travel spending to cards. HM Secretary of the UK Treasury estimates that UK government will save £300 million over five years using this card. An example of department’s purchase of six months’ worth of photocopy toner. In the past this simple transaction might have 50 separate process steps often over 2 hours of direct labor. By contrast, the same transaction with a corporate purchasing card can drop to less than 30 minutes of total direct labor. It may be more than 70% less costly all purchase order and payment processes can be combined into single step. 3.2 Models /Case Studies- cont’d

37. Dubai Case Study More than 1000 services are provided electronically through 26 governmental department and organizations in Dubai; i.e. Police dept., Transport Dept., citizenship dept…etc. The above mentioned organizations did their best to provide their services through Dubai Portal on the internet in an efficient manner. The government of Dubai has succeeded to issue non traditional payment channels or electronic payment to be used by customers to pay their public services’ fees through secured way of payment; electronic dirham or credit card. 3.2 Models /Case Studies- cont’d

38. Part IV. Recommendations, & Policy Implications 4.1 Policy Implications 4.2 Recommendations

39. 4.1 Policy Implications 1.Setting E-payment Initiative in Arab Countries 2.Activating the Electronic Government Initiative in Arab countries. 3.Increasing the Acceptance / Electronic Delivery Channels. 4.Improving Banking Technology Infrastructure. 5.Developing Appropriate Legal Environment. 6.Increasing Customers Awareness about the Benefit of Using Cards. 7.Increasing the banking Transparency Concerning the Cost and Interest Rate of Credit Cards.

40. 4.2 Recommendations 1.To Central Bank Decision Makers: a.To support banks in their efforts to increase the usage of credit cards. b.To develop and maintain a database for the usage and the issuance of credit cards. 2.To Government Decision Makers: a.To develop the legal environment to support the usage of credit cards. b.To develop the infrastructure required for e-government c.To encourage Public Private partnership for providing the adequate technology solutions.