Brief Discussion on Payment Settlement Systems in Bangladesh

Brief Discussion on Payment & Settlement Systems in Bangladesh Lila Rashid General Manager Payment Systems Department Bangladesh Bank

Country profile & Financial system Indicators Value Total adult population (age 15 and above) GDP growth Over 115 million 7% No. of Banks 57 No. of Bank branches till April 2018 9975 % of population has access to bank 25% % of Online branches (CBS) Around 85% No. of bank accounts (deposit), Dec 2017 Over 87 million

Payment System: Introduction �Payment system of Bangladesh has experienced a journey from manual clearing system to a semi-automated clearing system and finally to a fully automated system; �Payment systems modernization in respect to digitization has started with the live operation of BACPS in October, 2010; �In the later phase the system added other payment platforms namely BEFTN, NPSB, RTGS, MFS, etc to widen the scope of payment solution in the market; �As a result, both the efficiency and safety of the system have significantly been improved

Payment platforms in Bangladesh under PSD, Bangladesh Bank BACH • BACPS • BEFTN Operator E-wallet Monitor & Supervision NPSB • ATM • POS • IB • Mobile banking MFS PSD Operator Monitor & Supervision BD-RTGS

Present infrastructure A. Large Value Payment Segment (LVPS): BD-RTGS : High value Instruction based payment. B. Retail Payment Segment (RPS): i) BACH: a) BACPS: CIT based Cheque Clearing b) BEFTN : Instruction based funds transfer and payment ii) NPSB: Interoperability of Card and internet banking based Payment. iii) MFS : Mobile phone based financial services by the PSPs. iv) Others: Other retail services such as ewallet provided by the PSPs

BACH: BACPS (Instrument based) � BACH has two wings- for instrument based clearing it is Bangladesh Automated Cheque Processing System (BACPS) and for instruction based clearing it is Bangladesh Electronic Fund Transfer Network (BEFTN); � BB installed an automated clearing house in October 2010 based on Instruments (cheque) design with MICR code line; � Image exchange instead of physical movement of instruments; � The whole country is under a Single Clearing Network; � Settlement cycle T 0 for High Value (Tk 0. 5 million

BACH: BEFTN (Instruction based) • Instruction based country-wide electronic funds transfer; • End to end electronic fund transfer system, which facilitates interbank payment, clearing, and settlement of electronic credit and debit transaction; • Settlement cycle T 1 (next day clearing) for both Debit and Credit transactions; • Currently one session is available.

National Payment Switch (NPSB) �Enable inter-operability Indicators Value of Alternative Delivery Channels such as ATM, POS, Internet Banking (IB) etc. ; �Common platform for existing switches; �Expand the card based payment network and promote e-commerce. No. of Bank. ATM 51 No. of Bank. POS No. of Bank-IB 51 No. of ATM 9, 650 No. of POS 39, 650 No. of Debit card No. of Credit card 12. 25 Million 980. 74 Thous 13

BD-RTGS �Lunched in October 29, 2015; �Transmission & processing are automated; �Settlement takes place in central bank fund; �It is designed to settle high value (more than or equal to 100 thousand BDT) local currency transactions as well as domestic foreign currency transactions; � The system is currently allowed to handle only local currency, ; �Currently more than 7000 online branches of 55 scheduled banks are connected to this system out of total 11000 bank branches of 57 banks in the country; �Future Value Date transactions are possible.

Mobile Financial Services (MFS) �Brings the unbanked segment of population under financial services; �First guideline issued in 2011, currently MFS regulation 2018; �Bank-led model, parent bank must have at least 51% share; �Limited purpose payment facilities; �Client can open an account by filling up a short KYC; �Agents can be engaged to deliver services at the customer end; § A wide range of payments like funds transfer, salary, remittances, utility bills, merchant payment, tuition fees, social safety net payment etc are channeled through MFS;

MFS Market as of May 2018 • No. of Service providers- 4. 00 • • • Transaction Volume (Billion USD) 180. 00 No of transaction (million) 140. 00 160. 00 120. 00 100. 00 80. 00 60. 00 40. 00 20. 00 April, 13 Sept, 13 Feb, 14 July, 14 Dec, 14 May, 15 Oct, 15 March, 16 aug, 16 jan, 17 june, 17 • 18 3. 50 Number of Agents- 820 3. 00 Thousand 2. 50 Number of Registered customers- 61. 3 Million 2. 00 Number of active customers – 22. 9 Million 1. 50 Daily Transaction Volume 1. 00 – 6 Million 0. 50 Daily Transaction Value – 0. 00 10. 6 Billion BDT Growing @ 20% annually 200. 00

Electronic Payments Composition Transaction No. 97. 01% Transaction Amount 2. 87% 44. 01% 1. 12% 0. 97% 0. 04% 0. 86% BACPS 46. 19% 6. 70% 0. 24% BEFTN BD-RTGS NPSB MFS 12

Composition of Retail Payments (in terms of transaction amount) 10% 5% 1% 5% ATM 89% 12% POS Internet Payments 78% Cheque Clearing Mobile Banking EFT Card Payments 13

Recent initiatives 1. Introduced e-wallet services 2. Issue license to PSOs & PSPs 3. Interoperable Internet banking 4. Disbursement of Social Safety Net Benefits via BEFTN & MFS connectivity 5. Export Duty payment on real time 6. Introduced contactless card payment services via NFC technology 7. QR code based payment

New initiatives: upcoming 1. Up-gradation of BACH, two new features will be added: � EFT Multisession for BDT and domestic FC transactions � Domestic FC clearing by using CIT technology 2. MFS interoperability via NPSB; 3. QR code standardization; 4. Funds transfer through ATM; 5. Cash (Deposit) through Recycle ATMs; 6. VAT Online payments via RTGS; 7. Domestic FC transactions via RTGS; 8. E-payment Gateway for Govt. Payment; 9. Payment Systems Act ;

Current rules & regulation § Bangladesh Electronic Funds Transfer Network (BEFTN) Operating Rules, 2010; § Bangladesh Automated Cheque Processing Systems (BACPS) Operating Rules and Procedures, 2010; § Bangladesh Payment and Settlement Systems Regulation, 2014; § Electronic Fund Transfer Regulation, 2014; § BD RTGS System Rules, 2015; § Mobile Financial Services Regulation 2018.

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