CARD to ATM

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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 it
• Use of POS - a new database
• The 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

3
Payment system banking model
face-to-face banking
remote banking

• 24 by 7 access
• use of plastic card
• dispense cash
• pay bills

1980
4
Modes of access to account
ICT convergence

Merchants
At home
POS 1986
Telephone 1988
PC 1997
Internet 1999
Mobile 2003
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ATM, networked
ATM NETWORK
1990
more wallets for the customer
6
ATM network as payment portal
POS
PC
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 network Inter-bank withdrawal Inter-bank transfer Balance inquiry Bills payment 10 25 1 0
ATM network payment portal POS purchases Bills payment 0 0
Internet banking Inter-bank transfer Bills payment Mobile banking (using SMS) 100 0 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 network Inter-bank withdrawal Inter-bank transfer Balance inquiry Bills payment 10 25 1 0
ATM network payment portal POS purchases Bills payment 0 0
Internet banking Inter-bank transfer Bills payment Mobile banking (using SMS) 100 0 2.50
Central bank said PUBLISH YOUR CHARGES
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Source of non-cash (electronic) payments

• Banks database
• Credit card companys database

• Channels and instruments
• ATM card
• POS card
• Phone voice, data
• Computer data

10
Suppliers have their database too

• Its electronic
• Works on supplier-owned
• POS or device reader
• Uses paper or plastic card

11
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 or Electronic
air time load
Data services use short messaging or the SMS
telecoms protocol SMS traffic gt 1 billion a day
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Distribution Networkof prepaid cell cards
P R E P A I D C A R D U S E R S
ABOUT 1 MILLION
Retailers
Sub-Dealers
Major Dealers
Physical prepaid card user loads
TELCO
Non-Traditional Dealers
Sub-Agents
Virtual agent uses a special SIM to load
Business Centers
Earnings by commission (3-5 per level). Volume
discounts may also be given.
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Payments system telco model
Prepaid - settled when value is loaded Load
passed as subsequent sale or gift or used
To pass a load Type Amount PIN
Send to mobile number
Sender pays P1.00
Credit transfer!
This is the basic syntax of the SMS. The
prefix added to the mobile number determines
the type of transaction.
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Great innovation
User-1 TXT telco to ask-a-load from
User-2. Free TXT. Telco TXT User-2 amount and
cell no. of USER-1 User-2 TXT telco AMT
and PIN User pays P1.00 Send User-1
gets load
No air time?
Debit transfer!
It is a continuous buying and selling of air
time.
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Mobile phone market

• Philippine population 85 Mn
• No. of families of 5 17 Mn
• Mobile phone users 40 Mn
• creating 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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Pass-a-load model applied to e-wallet

• Over-the-Counter

• Step 1
• Go to any of the following Telcos Business
  Centers
• Loading Stations Remittance Partners

Step 4 You will receive a confirmation message
when money has been loaded to your account
Step 2 Fill out pertinent forms. You may be
asked to present an ID
Step 3 Pay the money to be loaded to the e-wallet
account
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Pay for purchases

• Debit Transfer

Step 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
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Pay for purchases

• Credit Transfer

Step 1 TEXT to 270 ltStore Codegt space ltamountgt
Step 2 You will receive an SMS from the telco confirming your payment, including the merchants name, the transaction amount and the reference number. Your e-Wallet balance will also be indicated.
For Globe, number to text to is 2318. There is
an additional step after step 1 You have to
reply with your G-CASH PIN.
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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 Telcos 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
Merchants
At home
POS
telephone
PC
ATM
Mobile phone - SMS
Telcos database
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Payment and remittance services banks and MTOs
vs. telcos
Bank Telco
Open account AMLA account opening Min. value per transaction Max. value per transaction Max. value per day Maintaining balance P100 Yes P100 P10,000 P50,000 P100 0 Yes P1 P50,000 P50,000 0
Domestic remittance OTC/ATM MTO P25 to P150 P39 and up P1 to P2.50 or 1-5/P10 or 1
International remittance P300 to P750 P15
Mobile banking P2.50
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Regulators 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
TEXT-A-DEPOSIT, TEXT-A-PAYMENT

• 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

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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 CooperativeBanks
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 9,000 9,000
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Number of poor families Number of thrift and
rural banks
Population 85M Mobile phone users 40M Fixed
line subscribers 6.5M 90 of RB customers have
cp SMS per day 1B Slide
borrowed from P. Roman
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Conclusion

It is common to decry the great digital divide
evidenced by the low computer and internet
penetration of less developed countries. 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
other emerging 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 eavila_at_bsp.gov.ph
in SMS thank u