1 the role of telecoms infrastructure in payment services and settlement...
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The role of telecoms infrastructure in payment services and settlement
_________________________________________ Reducing the cost of retail payments and
remittances through new technology
in the Philippines
Presented by Eve Avila, Central Bank of the Philippines
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Outline
Remote banking started itUse of POS - a new databaseThe telcos’ business model
• Payment for air time load• Creating an e-wallet account• Is telco a low - cost alternative to payments?
Telco as an infrastructure service provider
Conclusion
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Payment system – banking model
face-to-face banking
•24 by 7 access•use of plastic card•dispense cash•pay bills
remote banking
1980
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Modes of access to account
POS 1986
Merchant’s At home
Telephone 1988 PC 1997
Mobile 2003 Internet 1999
ICT convergence
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ATM, networked
ATM NETWORK
more wallets for the customer 1990
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ATM network as payment portal
PCPOS 2002
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Cost to pay using bank account
Transaction Cost (Php)
Check payment (listed for comparison only)
3.30
Over-the-counter inter-branch deposit 50
ATM networkInter-bank withdrawalInter-bank transferBalance inquiryBills payment
102510
ATM network payment portalPOS purchasesBills payment
00
Internet bankingInter-bank transferBills payment
Mobile banking (using SMS)
1000
2.50
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Cost to pay using bank account
Transaction Cost (Php)
Check payment (listed for comparison only)
3.30
Over-the-counter inter-branch deposit 50
ATM networkInter-bank withdrawalInter-bank transferBalance inquiryBills payment
102510
ATM network payment portalPOS purchasesBills payment
00
Internet bankingInter-bank transferBills payment
Mobile banking (using SMS)
1000
2.50
Central bank said: PUBLISH YOUR CHARGES
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Source of non-cash (electronic) payments
•Bank’s database•Credit card company’s database
Channels and instruments•ATM card •POS card •Phone voice, data•Computer data
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• It’s electronic• Works on supplier-owned POS or device reader• Uses paper or plastic card
Suppliers have their database too…
POS
Suppliers
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The telco as supplier of air time
Sell air time Voice and data services•Voice – P7.50 per minute•Text - P1 per send
Payment instrument:Prepaid card orElectronic air time load
Data services use short messagingor the SMS telecoms protocolSMS traffic – > 1 billion a day
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TELCO
RetailersSub-Dealers
PREPAID
CARD
USERSEarnings by commission (3-5% per level).
Volume discounts may also be given.
Distribution Networkof prepaid cell cards
Major Dealers
Non-TraditionalDealers
Business Centers
Sub-Agents
Physical prepaid card: user loads
Virtual: agent uses a special SIM to load
ABOUT 1 MILLION
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Payments system – telco model
To pass a load – Type Amount PIN Send to mobile number Sender pays P1.00
This is the basic syntax of the SMS. The prefixadded to the mobile number determines thetype of transaction.
Credit transfer!
Prepaid - settled when value is loaded
Load passed as subsequent sale or gift or used
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Great innovation
It is a continuous buying and selling of air time.
No air time? User-1 TXT telco to ask-a-load from User-2. Free TXT.Telco TXT User-2 amount and cell no. of USER-1User-2 TXT telco AMT and PIN User pays P1.00 SendUser-1 gets load
Debit transfer!
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Mobile phone market
Philippine population 85 MnNo. of families of 5 17 MnMobile phone users 40 Mncreating mobile commerce
Many mobile phone users are consumers who do not
have bank accounts or credit card accounts (e.g., children and students of all ages, ambulant
and market vendors, small and medium enterprises, low income families)
e-wallet for mobile commerce
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A new market segment
Open an e-wallet account to pay for –
• Small purchases• Transfer funds• Pay bills• Domestic remittance• International remittance• Get cash• Inquire balance
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Step 1Go to any of the following:• Telco’s Business Centers• Loading Stations• Remittance Partners
Step 2Fill out pertinent forms. You may be asked to present an ID
Step 3Pay the money to be loaded to the e-wallet account
Step 4You will receive a confirmation message when money has been loaded to your account
Pass-a-load model applied to e-wallet• Over-the-Counter
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• Debit TransferStep 1 Indicate your name and cell phone
number on the form the merchant will give.
Step 2 The merchant will initiate the payment transaction using its service unit.
Step 3 You will receive an SMS request from the merchant to deduct the transaction amount from your wallet.
Step 4 Reply with YES (MPIN) (ref. no.) to confirm the purchase or NO (MPIN) (ref. no.) to reject the purchase
Pay for purchases
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Pay for purchases
• Credit TransferStep 1
TEXT to 270:<Store Code> space <amount>
Step 2
You will receive an SMS from the telco confirming your payment, including the merchant’s name, the transaction amount and the reference number. Your e-Wallet balance will also be indicated.
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Merchant or receiver collects Cash
• Settlement
Step 1
Beneficiary will get an SMS confirming receipt of money in his e-wallet.
Step 2
Beneficiary may encash through the following channels
•Telco’s Business Centers•Authorized Outlets•ATM (for e-wallet with a card)
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Modes of access to payment accountwith bank, credit card or telco
POS
Merchant’s At home
telephone PC
ATMMobile phone - SMS
Telcos’ database
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Payment and remittance services: banks and MTOs vs. telcos
Bank Telco
Open accountAMLA account openingMin. value per transactionMax. value per transactionMax. value per dayMaintaining balance
P100Yes
P100P10,000P50,000
P100
0YesP1
P50,000P50,000
0
Domestic remittanceOTC/ATMMTO
P25 to P150P39 and up
P1 to P2.50 or1-5%/P10 or 1%
International remittance P300 to P750 P15
Mobile banking P2.50
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Regulator’s regulations • Electronic banking activities registered with the
central bank• Review of mobile banking products includes
telco as service provider• Banks engaging in electronic banking covered
by rules on risk management, customer protection, security and confidentiality, integrity of processes
• Agreement for an onsite review of operations of telcos’
• Transaction caps• Submission of semestral reports• Virtual account opening requires ID presentation
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Countryside banking using telcos
Commercial banks• branches • ATMS 6,867• Mobile banking
Rural and thrift banks• branches• ATMS • Mobile banking
•99% of rural bank customers have mobile phones
•Mobile phones have high penetration also in rural areas
•Telcos’ products promote m-commerce
•Micro-finance gaining ground in the rural areas
•Access to banking services could sustain momentum of economic activity and alleviate poverty
TEXT-A-DEPOSIT, TEXT-A-PAYMENT
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Widen access to payment services using telcos’ infrastructure
Commercial banks• branches • ATMS 6,867• Mobile banking
Rural and thrift banks• branches• ATMS • Mobile banking
Universal & Commercial
Banks
Thrift Banks
Rural & Cooperativ
eBanks
Total number 4,313 1,322 2,075
ATMs 6,178 616 73
Total banks 7,710
Total ATMs 6,867
Telcos cash outlets
9,000
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Number of Number of poor poor
familiesfamiliesNumber of Number of thrift and thrift and
rural banksrural banks
Population 85MMobile phone users 40MFixed line subscribers
6.5M90% of RB customers have cpSMS per day 1BSlide borrowed from P. Roman
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ConclusionIt is common to decry the great digital divide evidenced by the low computer
and internet penetration of less developedcountries.
The new adaptive technology developed by the Philippines may yet be the great equalizer. Standing in the shoulders of giants, namely the IT and wireless technologies developed by rich countries, the Philippines saw an advanced adaptation of the SMS that is truly suited to its culture. Many otheremerging markets may find this killer application quite useful to their own requirements. In SMS: thank u
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The use of the materials, findings, interpretations, and conclusions expressed in this presentation are entirely those of the presenter. They do not necessarily represent the view of the Bangko Sentral ng Pilipinas . Comments regarding this presentation may be sent to [email protected]
in SMS: thank u