Recent Developments in Payment Settlement Systems in Sri

Recent Developments in Payment & Settlement Systems in Sri Lanka 12 th SAARC Payments Council Meeting Dhaka, Bangladesh 18 November, 2012

Payment System High Value Payment & Settlement Systems in Sri Lanka Real Time Gross Settlement System Sri Lanka Interbank Payment System (SLIPS) Systems Retail Payment Cheque Imaging & Truncation System Card based Payment Mechanisms Phone based Payment Mechanisms Internet based Payment Mechanisms

Retail Payment Systems Objectives Improve Security Reduction of Costs Reduction of Transaction Clearing & Settlement Time Migration to Electronic Payments Promote Financial Inclusion Major Developments • Launch of the first Mobile Phone Based E-money System in Sri Lanka • Adoption of Terminal Line Encryption technology • Arrangements for the Common Card & Payment Switch

Mobile Phone Based E-money System • The first mobile phone based e-money system was launched in June 2012. • Operator – A mobile network operator in Sri Lanka licensed by the Central Bank to operate the mobile phone based e-money system • Custodian and trustee arrangements to ensure customer protection and system reliability • Regulation, supervision and oversight of the system is based on the Mobile Payments Guideline for Custodian Account based Mobile Payment Services issued by the Central Bank

Mobile Phone Based E-money System Statistics v. Total number of registered customers (as at end Oct 2012) – 740, 585 v. Total number of merchants (as at end Oct 2012) – 13, 284 v. Aggregate value of e-money (as at end Oct 2012) – Rs. 80, 000. 00 v. Transaction data (Oct 2012) Transaction Type Volume Value (Rs) E-money Top-ups 19, 282 36, 679, 800 E-money Transfers 3, 857 3, 981, 627 13, 785 31, 220, 660 164, 470 146, 565, 284 221 388, 704 Cash-outs Utility Bill Payments OTC Payments

Terminal Line Encryption Technology • Adoption of Terminal Line Encryption (TLE) technology by financial acquirers for payment cards operating in Sri Lanka was mandated. • To mitigate fraud risk associated with cardholder data theft while in transit

Common Card & Payment Switch • Lanka. Clear (Pvt) Ltd. , the operator of the proposed common card and payment switch, will be implementing the switch in a phased approach, based on different payment channels/mechanisms. • The objective is to promote interoperability by providing a common platform to facilitate domestic electronic payments. • Pilot stage of Phase I of the project (Common ATM Switch) will commence shortly.

Systemically Important Payment Systems The two systemically important payment systems of Sri Lanka (i. e. Lanka. Settle System and Cheque Imaging & Truncation System) are being assessed against the Principles for Financial Market Infrastructure published by CPSS of BIS in April 2012.

Challenges Ahead …. • Introducing interoperability for mobile payment systems • New entrants to the payment industry • Several proposals from several entities and people • Technology is evolving with a need for partnership for banks and banks have lack of expertise • Increasing trend in cheque returns

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