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PROJECT FOR THE REFORM OF

CENTRAL BANK OF WEST AFRICAN STATES (BCEAO). Mission pour la Réforme des Systèmes et Moyens de Paiement. PROJECT FOR THE REFORM OF. PAYMENT SYSTEMS AND INSTRUMENTS. IN WAEMU MEMBER COUNTRIES. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIES O U T L I N E. WAEMU in brief

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PROJECT FOR THE REFORM OF

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  1. CENTRAL BANK OF WEST AFRICAN STATES (BCEAO) Mission pour la Réforme des Systèmes et Moyens de Paiement PROJECT FOR THE REFORM OF PAYMENT SYSTEMS AND INSTRUMENTS IN WAEMU MEMBER COUNTRIES WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  2. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESO U T L I N E • WAEMU in brief • Why a Payment System reform? • Content of the reform • How to reach objectives? • Lessons learned from our experience WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  3. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIES WAEMU IN BRIEF WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  4. THE WEST AFRICAN MONETARY UNION WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  5. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESWAEMU IN BRIEF: FACT SHEET • Total Population > 70 Million Inhabitants • Active Population : 28 Million Inhabitants • Nber of Account Holders : 2,000,000 • Account Holders / Active Population < 10% • Fiduciary Circulation / Money Supply > 30% WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  6. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIES WHY A PAYMENT SYSTEM REFORM IN WAEMU? WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  7. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESWhy a Payment System Reform In WAEMU? THE RATIONALE OF THE REFORM IS THE WEAKNESSES OF THE CURRENT SYSTEM,IN PARTICULAR: • limited number of participants • low operational security level • lack of control on the system’s capacity • poor technological infrastructures • high transactions cost • few account holders • poor interbank relationship • high use of cash • few automated operations WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  8. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESWhy a Payment System Reform In WAEMU : established facts! AVERAGE SETTLEMENT LAGS ARE: • Checks drawn on the same bank: 24 hours • Town checks:72 hours • Checks drawn on a bank in the country: more than 1 week • Checks drawn on a bank in WAEMU:1 week to 1 month • Checks drawn on banks outside WAEMU: more than 1 month WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  9. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESWhy a Payment System Reform In WAEMU:current situation Scriptural payments in 2001: relative shares of the volume (excluding bank cards) WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  10. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESWhy a Payment System Reform In WAEMU:current situation Scriptural payments in 2001: relative shares of the value (excluding bank cards) WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  11. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIES CONTENT OF THE REFORM WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  12. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESContent of the Reform:major objectives • increase payment systems’ efficiency and safety • reduce payment management costs • enhance interbanking and increase number of account holders • reduce use of cash in payments • comply with international standards WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  13. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESContent of the Reform:various components • Setting up of a real time gross settlement system (RTGS) for large value payments • Building of an interbank electronic clearing system • Establishment of an interbank card based payment system at the regional level • Building of a suitable telecommunication infrastructure for payment systems • Adoption of an adequate legal and regulatory framework governing the new payment systems WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  14. Regional Credit card system CLEARING SYSTEM RTGS System regional Exchanges National Systemically Important Payments Local Retail Payments Telecommunications system Payment Incidents Central Legal and regulatory framework PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESContent of the Reform:Overall view of the project WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  15. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESBuilding a RTGS system: a strategic decision • A RTGS system favors the development and integration of regional capital markets Rapid and efficient Infrastructure Liquid capital markets Financial Efficiency Secured Financial Instruments WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  16. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESFunctioning of BCEAO’s RTGS system • Direct exchanges between participants at a regional level • Including a real time Delivery/Payment system • for public securities held by BCEAO, • based on the Cash settlement accounts managed in the RTGS system WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  17. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESRTGS system : criteria for membership Institutions SA S.A. BCEAO S.A.E P. S.A.E.P. SA.E.P. S.A.E P.. BCEAO SA N.E. C.A. N.E. C.A. Transfer system outside the region BCEAO HQ Regional RTGS system Main Branch ... Main Branch BCEAO Indirect Direct Direct Participant Participant Participant Participants Participant Direct Indirect BCEAO BCEAO BCEAO operations Operations Main Main Sub- Sub- Branch Branch Participant Participant Customers Customers Customers Customers Indirect Indirect Participant Participant WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002 Non Eligible- Non eligible Third party Third party Customers Customers

  18. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESThe roles that BCEAO should play Activity Central Bank BCEAO Operations Operations for non eligible third parties Intraday advances BCEAO participants Operational management of the RTGS system Authority responsible for the supervision of the RTGS system RTGS System Provision of services Direct Participants Sub Participants Indirect Participants WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  19. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESThe Automated Clearing system:key options • Instruments that may be accepted for clearance • All existing types of scriptural instruments • Acceptance • NATIONAL values presented at the all Clearance Access Points (CAPs) • regional values will be accepted at the CAPs once the RTGS is operational • Participants • The Central Bank, Treasury, Post Office , commercial banks WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  20. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESThe Automated Clearing system:Functioning principles • Automated process from exchanges to settlement. • Clearing exclusively processed on banks ’ electronic remittance files • Different channel for the exchange of paper based values which may be used as proof • Suppression of clearing sessions and creation of a frontdesk for the exchange of paper based values • Same time required for settlement or rejection according to the nature of the the settlement WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  21. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESThe Automated Clearing System : check images The use of a system based on check images for the exchange of paper based values, in order: • not to depend on the paper based circuit • to reduce considerably the time required for settlement • to avoid banks representation WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  22. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESCard based payment system: orientations • The card based system rests on the following principles: • a regional interbanking • a regional payment or debit bank card • a smart card technology WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  23. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESCard based payment system: orientations (continued) • A card based interbanking means: • An alternative payment instrument • A specific interbank trade mark and logo • A new instrument of negotiation with the major international bank card networks • Optimized infrastructures • Scale economies • Optimized security WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  24. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESCard based payment system: operational aspects WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  25. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESTelecommunications infrastructure: why? PAYMENT SYSTEMS REQUIRE A good quality, efficient and performing telecommunication network at the regional level, which guarantees : • a great availability • reliability, integrity and confidentiality of financial information • good quality of services which should be the same at all access points of the network • optimal investment and operation costs WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  26. Satellite FF FF Participant Participant FF Participant Tour radio Tour radio FF SUB BRANCH BCEA0 HEAD QUARTERS Main Branch FF Participant Participant PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESTelecommunications infrastructure: Global architecture of the network WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  27. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESThe legal and regulatory framework: strategy • Legal security of payment systems • Clear, accessible rules and procedures which may be easily interpreted • Legal environment notably adapted to electronic payments • Rules complying with international standards WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  28. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESThe legal and regulatory framework: objective • Translate into legal texts the options made for the systems to be put in place • Define the various procedures for the adoption of texts WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  29. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESContent of the Reform:overall schedule of the project • Legal and regul. Framework first quarter of 2003 • Telecom. Infrastructure mid 2003 • Automated Clearing systemmid 2003 • RTGS end of 2003 • Card based payment systemmid 2004 WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  30. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIES HOW TO REACH OBJECTIVES? WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  31. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIESOrganizational chart of the Project Steering committee BCEAO project group M.R.S.M.P (project manager) D.I. D.C.B. D.C. D.O.F. D.A.J. M.R.C.I.P. D.E. D.E.M. Advisory Committee on Payments sub committees Steering committee (National Directions) “ Treasurers ” “ RTGS operations ” S.O.F. S.C.B. S.E. “Card based systems ” “ Clearing ” S.I. S.C MRSMP Correspondent “ Legal and regulatory framework ” Committee of Experts “ Advisory Committee on Payments  ” “ International Expert Panel ” WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  32. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIES LESSONS LEARNED FROM OUR EXPERIENCE? WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  33. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIES Lessons learned from our experience: management of the project A global and multidisciplinary approach, taking into account: • the solution of all problems relating to payment systems • the establishment of an appropriate legal framework • the enhancement of telecommunications systems • the establishment of international cooperation between the central banks • the monitoring of the project management: planning, financing and follow up of the implementation • the development of communication and sensitization actions • the building up of a database to monitor the systems WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  34. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIES Lessons learned from our experience: implementation aspects • The Central Bank plays a decisive role in the modernization of payment systems • A close collaboration between banks is necessary • A prudent and step by step approach for the implementation of such a complex project is necessary with a clear distinction between the various fields. WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  35. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIES Lessons learned from our experience: implementation aspects • The involvement of the banking community at all levels in the implementation of the project is crucial for its success • Collaboration between banks and the central bank should be supported by concrete actions in implementing • Peculiar attention should be given to the choice between an in house development and acquisition of software packages WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  36. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIES Lessons learned from our experience: specifications of systems • Security should be taken into consideration from the very beginning and throughout the systems implementation process • For the choice of the communication network, an equilibrium between security and costs is necessary, on the basis of an in-depth analysis of the most appropriate mode of communication. WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

  37. PAYMENT SYSTEM REFORM IN WAEMU MEMBER COUNTRIES THANK YOU FOR YOUR ATTENTION ! ! ! WAEMU PAYMENT SYSTEMS REFORM PROJECT World Bank Panel on Global Reform in Payment Infrastructure June 20, 2002

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