The World Bank has a highly experienced payment systems team that has supported comprehensive payment system reforms in more than 100 countries around the world. In practice, the Bank supports payment system reforms in several ways that can be summarized as follows: Supporting comprehensive initiatives (Algeria, Angola, Azerbaijan, Bahamas, Barbados, BCEAO, BCEAC, China, Ecuador, Georgia, Paraguay, Rwanda, Uruguay, Tanzania, Trinidad and Tobago, Uzbekistan, Venezuela, Vietnam, West Bank and Gaza, etc.) Undertaking initial diagnostics and developing reform strategies (Costa Rica, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, India, Indonesia, Jamaica, Libya, Madagascar, Morocco, OECS, Poland, Thailand, Tunisia, etc.) Providing specific technical advice (Brazil, Chile, Colombia, Estonia, Hong Kong, Mongolia, Moldova, Netherlands Antilles, Peru, Qatar, Russia, Ukraine, etc.) Coordinating and managing multi-country and regional initiatives: Arab Payments and Securities Settlement Initiative (API), Central Bank of Central Africa (BCEAC), Central Bank of West Africa (BCEAO), Commonwealth of Independent States Payments and Securities Settlement Initiative (CISPI), Southern African Development Community (SADC), Western Hemisphere Payments and Securities Settlement Forum (WHF), and South Asia Payments and Securities Settlement Initiative (SAPI). Supporting the launch of cooperative arrangements (e.g. National Payment Councils). Organizing training activities Preparing support and educational materials including study methodologies. Conducting Research in innovative areas (e.g. Oversight). Preparing and publishing case studies. Coordinating reform efforts with other areas in the financial sector network (e.g. credit reporting, access to financial services, capital markets).
The main areas in which we intervene include:Providing a professional and complete stocktaking report. Supporting the country to adopt a holistic approach to financial infrastructure reform. Supporting the country to develop the vision and the strategy. Supporting the implementation of the reform providing advice. Providing the most updated expert advice on all areas related to payment system reform, including: i) Legal Framework , ii) Retail systems, including innovative payment solutions and technologies like mobile payments, iii) Government Payments; iv) Cross-Border Payment Arrangements, including international remittances; v) Settlement of domestic foreign exchange denominated transactions; vi) Large Value systems and their relations with interbank money market; vii) Securities settlement systems and their interactions with other settlement systems; viii) Central Bank Oversight; ix) Domestic and International Cooperative arrangements; and x) Integration of payment system reform with the reform of other components of the financial infrastructure such as credit reporting, the development of trading platforms, and enhancement of the capital market structure.
Typical ToolsThe World Bank has undertaken work in the area of payment system development either in the form fee-based Technical Advisory Services requested by a number of countries, or as part of World Bank loans with a financial sector/payment systems component. Examples of these include: Barbados, Israel, Jamaica, Libya, Mauritius, Qatar, Trinidad & Tobago and Venezuela (fee-based); Angola, China, Dominican Republic, Sri Lanka, Vietnam and the Western African Currency Union (loans). Below are select detailed descriptions of country and regional projects. The Banco Central de Republica Dominicana (BCRD) requested a Western Hemisphere Payments and Securities Clearance and Settlement Initiative (WHI) country assessment that took place in January 2002. The WHI Report presented the results of the assessment of payments and securities clearance and settlement processes based on international standards and best practices and included several observations for the improvement and future development of the payments and securities clearance and settlement arrangements in the Dominican Republic. A Financial Sector Technical Assistance Loan (FTAL) was approved by the Bank Board on February 2004 and became effective in August 2005. The FTAL included a component for an overall payments system reform. The FTAL supported a comprehensive reform of the payments system, including the launch of safer and more efficient systems and an improved legal and oversight framework. Large value and time critical payment transactions were envisaged to be processed electronically in a Real Time Gross Settlement System (RTGS) environment. This system became live on April 2008. In addition, the full standardization of cheques and clearing procedures as well as an increased automation (i.e. through truncation and/or cheque imaging) was also aimed at reducing the costs associated with cheque processing and making possible the launch and increased use of efficient payments instruments.
The Bank of Jamaica (BOJ) requested a Western Hemisphere Payments and Securities Clearance and Settlement Initiative (WHI) country assessment that took place in June 2002. The WHI Report presented the results of the assessment of payments and securities clearance and settlement processes based on international standards and best practices and included several observations for the improvement and future development of the payments and securities clearance and settlement arrangements in Jamaica. The document also indicated some suggestions on how to move forward the project of reforming the overall payments system in the country. The BOJ is responsible for the oversight of the payment and settlement systems in Jamaica. Consistent with this objective and following some of the WHI observations, the BOJ has embarked on a process of payment system reform to enhance the safety and efficiency of these systems in order to reduce systemic risks, as well as minimize BOJ credit risk. The BOJ management determined that external help was needed to continue with the reform effort. In this regard, a letter was sent on April 2005 from the BOJ Governor to the Bank’s Jamaica Country Director at the World Bank (the Bank) requesting fee based advisory services recognizing the unique expertise of the Bank in supporting comprehensive payments and securities settlement systems reforms. The Bank accepted the request. The objective of the Technical Assistance was to support the BOJ in the design and implementation of the overall payments and securities settlement systems reform considering the following aspects: legal and regulatory framework, operational issues, risk management function and oversight function.
The Banco Central de Venezuela (BCV) jointly with other financial sector regulatory agencies and the banks are committed to the modernization of the payments system in Venezuela. In order to obtain guidance on the overall reform, the BCV requested a Western Hemisphere Payments and Securities Clearance and Settlement Initiative (WHI) country assessment. The WHI Report presented the results of the assessment of payments and securities clearance and settlement processes based on international standards and best practices (November 2002). The document also indicated some suggestions on how to move forward the project of reforming the overall payments system in the country. As the reform has evolved, its scope has broadened and the BCV Board considered that external help was needed to continue with the reform effort. In this regard, a letter was sent on December 2002 from the BCV President to the Vice-president of the LAC region at the World Bank (the Bank) requesting fee based advisory services recognizing the unique expertise of the Bank in supporting comprehensive payments and securities settlement systems reforms. The Bank accepted the request. The objective of the Technical Assistance was twofold. First, to support the BCV in the design and implementation of the overall payments and securities settlement systems reform considering the following aspects: legal and regulatory framework, systems integration, risk management function and oversight function. This component provided the BCV with an integrated view of the reform and allowed for the fulfillment with the BCV Law mandate regarding the oversight function. Second, to support the BCV (Oficina de Proyecto de Sistemas de Pagos, OPSP) in the development and implementation of the ACH Project.
Qatar. In recent years, the Qatar Central Bank (QCB) has been leading a program to modernize the country’s payments and securities settlement systems. Several new systems have been launched as part of this effort. In light of these developments, the QCB requested the assistance of the World Bank to review the new systems with a view to identifying possible improvement measures in their safety, efficiency and integrity. Also, following the Bank’s holistic approach to payment system reform, World Bank experts analyzed other areas not directly related to system implementation (the legal and regulatory framework, payment system oversight, and settlement of non-government securities, among others) not yet addressed by the reform effort and indicated some suggestions on how to move forward with improving/upgrading these other aspects. More recently the bank is advising on the interconnection of the Doha Securities Market with the payment systems of the QCB.
West African Economic and Monetary Union (WAEMU). In 2000, the World Bank approved a US$9.4 million credit to help establish and install an appropriate set of regional payment mechanisms to satisfy the evolving needs of all market sectors in the West African Economic and Monetary Union (WAEMU). The new regional payment mechanisms was intended to create an environment for making payments in a safe, sound, secure and timely manner, in order to encourage a high level of user confidence in WAEMU financial systems and satisfy internationally accepted standards. WAEMU is comprised of eight countries (Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo), which share a common currency (CFA franc), and Central Bank (Banque Centrale des Etats de l'Afrique de l'Ouest, BCEAO). The BCEAO Regional Payment Systems project contributed to the development of non-cash transactions, strengthening of banks, and deepening of the financial sector, increased regional integration and expanded trade and investment among and within member countries. This was achieved through: i) the modernization of the low value clearing system, designed to meet the daily low-value payment needs of a broad spectrum of users in the private sector; ii) the establishment of a real time gross settlement system at the regional level; iii) the formation of an inter-bank card system, and the development of a common bank card product, enabling any bank customer to use it in any Automated Teller Machine or participating merchant's facility in the sub-region; iv) strengthening BCEAO's private telecommunications satellite network so that banks in the member countries could make use of BCEAO's facilities and; v) providing support for the management, monitoring and evaluation, procurement and legal framework of the new system. The project spanned over several years and saw relevant advances towards the realization of most of the planned objectives.
Arab Payments and Securities Settlement Initiative. Following a request from the central banks of the countries of the Middle East and North Africa (MENA) Region, the World Bank and the International Monetary Fund, in cooperation with the Arab Monetary Fund, lead the Arab Payments and Securities Settlement Initiative (API). The objective of the Initiative is to describe and assess the payment systems of the countries of the MENA Region with a view to identifying possible improvement measures in their safety, efficiency and integrity. An International Advisory Council (IAC) comprising international organizations and central banks and securities commissions from other regions of the world with high expertise in these topics supports the API. As it has been the case with the Western Hemisphere Payments and Securities Settlement Initiative (WHI), it is expected that, as result of the API, several countries of the Region will reform their payments and securities settlement systems with World Bank involvement.
Commonwealth of Independent States Payments and Securities Settlement Initiative ( www.cis-pi.org). Following a request from the central banks of the countries of the Commonwealth of Independent States (CIS), the World Bank leads the CIS Payments and Securities Settlement Initiative (CISPI). The objective of the Initiative is to describe and assess the payment systems of the countries of the CIS with a view to identifying possible improvement measures in their safety, efficiency and integrity. An International Advisory Council (IAC) comprising international organizations, central banks and securities commissions from other regions of the world with high expertise in these topics supports the CISPI. As it has been the case with the Western Hemisphere Payments and Securities Settlement Initiative (WHI), as result of the CISPI, several countries of the Region have reformed their payments and securities settlement systems with World Bank involvement. Moreover, the CISPI has evolved into a permanent forum with the creation of the CIS Working Group on Payment Systems in 2008. The Western Hemisphere Payments and Securities Settlement Initiative, WHI ( www.forodepagos.org). The WHI is a Regional Initiative that started in 1999 under the partnership World Bank/CEMLA in collaboration with other international (CPSS of BIS, IMF, IADB, etc.) and national organizations (Fed Board, Fed New York, Central Bank of Italy, Central Bank of Spain, etc.). It has created momentum for strengthening payments and securities settlement systems in Latin America and the Caribbean. It has undertaken the assessment of payment systems in 24 countries (in chronological order Peru, Argentina, Chile, Trinidad and Tobago, The Bahamas, El Salvador, Colombia, OECS, Brazil, Colombia, Mexico, Costa Rica, Jamaica, Ecuador, Venezuela, Bahamas, Netherlands Antilles, Honduras, Dominican Republic, Nicaragua, Guatemala, Paraguay, Bolivia and Uruguay). As a result, the World Bank has been or is involved in the implementation of reforms in several countries, through FTALs (e.g., Brazil, Honduras, Dominican Republic, Guatemala and Paraguay) and through Advisory Services (Bahamas, Barbados, El Salvador, Trinidad and Tobago, Venezuela and Jamaica). The WB role has evolved from coordination to support of the Forum (the Initiative has evolved to a sustainable Forum). CEMLA and the Working Group on Payment System Issues of Latin America and the Caribbean (WGPS-LAC) coordinate the Forum. The WB coordinated event “Payments Week” held once a year under the WHI has become one of the key events on the payment systems area at the international level.
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