Massimo Cirasino Head Payment Systems Development Group The World Bank Co-Chairman

1. The Private Public Partnership to Enhance the Efficiency of and Expand Access to Remittance Services Massimo Cirasino Head Payment Systems Development Group The World Bank Co-Chairman CPSS/WB Task Force on General Principles for International Remittance Services

2. The Global Payments Week: the Meeting of the Regional Payments Initatives

3. OBJECTIVE: Supporting improvements to payment, remittance and securities settlement systems in the Region Strategic Pillars Integration of securities and payments Cooperation with international organizations Country Ownership

4. Project Organization Secretariat Core Team (World Bank, Regional Partners) Regional Central Banks Committee InternationalAdvisory Council World Bank-Chair Secretariat: WB-Regional bodies International Organizations Central Banks Securities Commissions COUNTRY TEAM Local Authorities COUNTRY ASSESSMENT • Public Report • Statistical Tables • Glossary • Recommendations • Report/Action Plan RegionalSecurities Commissions Group

5. Western Hemipshere Payments and Securities Settlement Forum • Arab Payments Initiative • Commonwealth of Independent States Payments • And Securities Settlement Initiative (CISPI) • South Asia Payments Initiative (SAPI) • Southern Africa Development Group (SADC) Payment System Project

6. GLOBAL PAYMENTS WEEK 2008 OVERCOMING SHORTFALLS IN PAYMENT SYSTEMS TIME IS NOW!!!

7. The World Bank Role in the Transformation Process in Payment Systems

8. The Payment System Development Group is at the center of an international network, whose main objective is supporting countries to reform Payments, Remittances and Securities Settlement Systems • The network comprises multilaterals, other standard setters, G-10 and non G-10 central banks, securities commissions, regional groups and other donors • The Group is in constant dialogue with the major stakeholders in the industry (e.g. SWIFT, Card networks, CLS Bank, commercial banks, other financial institutions, payment system operators, remittance service providers, vendors) at the global and domestic levels • The Group has developed innovative tools to sustain the network (e.g. the regional initiatives)

9. 1. Help develop sound and efficient payment, remittance and SS systems 2. Support Access to Finance Stocktaking & Policy Advice Implementation Support Vision & Strategy Legal Framework Large-Value Systems Retail Payment Systems Government Payments Remittances Securities Settlement Oversight & Cooperation Financing: WB loans-grants, fee-based and other TA, Regional Initiatives, FSAPs, support to FIRST-funded Initiatives, Others

10. Development and Implementation of the BIS-WB General Principles for International Remittance Services

11. An international remittance is a cross-border, person-to-person payment of relatively low value • Typically by migrant workers to their families. Especially from developed to developing countries • Person-to person, low value - ie not commercial or wholesale payments • Domestic remittances also exist • Recurrent - but typically made by individual transfers (eg not by standing order) • Typically credit transfers • For remittance service providers (RSPs), often indistinguishable from any other retail cross-border transfers

12. Issues with remittances: • Usually expensive • Sometimes slow • Sometimes inconvenient • Occasionally unreliable Focus here is on payment system aspects (not developmental, immigration, balance-of-payments or other aspects)

13. GP1: The market for remittances should be transparent and have adequate consumer protection • Transparency means information about the service (price, speed, fx charge etc). Transparency promotes competition and should drive down prices • Especially important for remittances: • “Access” problems for users • Complex to work out price • What is appropriate consumer protection? Most important are probably “error resolution” procedures (RSPs’ own or national schemes). Beware of the cost of some possibilities!

14. GP2: Improvements to payment system infrastructure that have the potential to increase the efficiency of remittance services should be encouraged • Domestic payment infrastructure. • Remittance services usually depend to some extent on this. But the infrastructure may not always be very efficient, especially in receiving countries. • Cross-border payment infrastructure. • Greater standardisation to help STP in correspondent banking? • Direct links between domestic systems as an alternative to correspondent banking? • Linkages of different networks?

15. GP3: Remittance services should be supported by a sound, predictable, non-discriminatory and proportionate legal and regulatory framework • Does not mean special laws/regulations for remittances • Sound, predictable, non-discriminatory … • … and proportionate! Avoid danger of over-regulation. What is the problem regulation is meant to cure? Is regulation the best way to cure it? • For key corridors, sending and receiving countries may want to cooperate if there seem to be legal obstacles

16. GP4: Competitive market conditions, including appropriate access to domestic payments infrastructures, should be fostered in the remittance service industry • Importance of contestability and removing barriers to entry • Avoid exclusivity conditions (as opposed to an agent choosing to offer only one remittance service) • Are there problems with direct or indirect access to domestic payment systems?

17. GP5: Remittance services should be supported by appropriate governance and risk management practices • RSPs face financial risk (eg if liquidity is supplied to disbursing agents), legal risk, operational risk, risk of fraud, reputational risk • Good governance and risk management practices by RSPs make remittance services safer and help protect consumers … • … but there is unlikely to be any systemic risk so protection measures should be proportionate to the risks

18. Many people may need to take action. But Remittance Service Providers and the authorities have particularly important roles: Who should take action? Remittance Service Providers should participate actively in the application of the general principles should evaluate what action to take to achieve the public policy objectives through implementation of the general principles Public Authorities Form of action by authorities? Monitoring and outreach? Direct provision? Catalyst/ facilitator? Monitoring? Dialogue? Regulation? More interventionist Less interventionist

19. Remittances: the BIS-WB General Principles for International remittance service are a multilateral effort to address a global challenge Assessments: El Salvador (September 2006)Morocco (November 2006) Honduras (April 2007) Haiti (September 2007) Sri Lanka (Q1 2008) Nigeria (February, 2008) Uganda (April 2008) Guatemala (April 2008) Czech Republic (May 2008)

20. The General Principles have been formally endorsed by the G-8, G-20 and the Financial Stability Forum • Both Sending and Receiving Countries have been urged to adopt them!!!

21. World Bank Remittance Price Database LAUNCHED SEPTEMBER 2008!Remittanceprices.worldbank.org • To design a refined methodology to gather comparable remittance price data and measure the economic gains from lower costs to consumers • Increase transparency • Increase competition • Inform consumers • The project will assist with the delivery of General Principle 1

22. The Country Pairs The Country Pairs (“The corridors”)

23. Public/Private Partnership to Enhance the Efficiency of and Expand Access to Remittance Services

24. At their summit in Hokkaido, Japan, in July 2008, G8 Heads of States issued the following statement: • “We acknowledge the importance of facilitating remittance flows given their development impacts. The G8 conference on remittances in Berlin in November 2007 reviewed the actions agreed at the Sea Island Summit in 2004. In this context, we will follow-up the seven recommendations adopted at the Berlin conference on improving data, development impact, remittance services, access to finance, innovative channels and on the creation of a Global Remittances Working Group. We appreciate the work done by international financial institutions in this regard and invite the World Bank to facilitate the work of the group and provide for coordination.”

25. Public/Private Partnership to Enhance the Efficiency of and Expand Access to Remittance Services • One of the recommendations endorsed at the G-8 Outreach Meeting on Remittances, held in Berlin in November 2007, was to work collectively to implement the General Principles for International remittance services (Recs 3 & 6) and foster access to financial services (Rec 5) • In this vein, the World Bank and DFID in cooperation with the private sector worked to create a group of international organizations, donors, national authorities from developed and developing countries, and the private sector to meet regularly to set concrete goals and actions for the international remittance market, and to co-ordinate efforts to avoid duplication (Recs 4 & 7)

26. PPP Goals • Primary goals of this group would be: • to seek practical, actionable mechanisms to implement the General Principles for International Remittance Services • to increase access to finance through remittance-linked financial products • to structure the international discussion between regulators and industry on legal and regulatory issues related to remittance • to acilitate the flow of remittances through regulated channels • to provide a forum for international discussions between regulators and industry generally • to facilitate the work on payment and market infrastructure and access to finance of the WB-led G8 Global Remittances Working Group

27. PPP: Organizational Arrangements PPP Goals • Coordinated by the World Bank, in cooperation with DFID • An Advisory Committee is constituted with representatives from institutions that have an important role in the field of remittances and the capacity to contribute actively to the partenership • Other interested parties will be also welcomed to participate • The forum would hold an annual plenary meeting where focal topics would be chosen for subcommittee work. These subcommittees would meet separately and regularly to meet their stated goal. Subcommittees will be both topically and regionally focused • First meeting to take place in Vienna TODAY!, 2008

28. Some suggested topics for initial subcommittee work would be: • The implementation of an Industry Code of Conduct, global in its scope, which would be modeled on previous efforts undertaken in the United Kingdom. • The issue of legal and regulatory reform is of paramount importance to industry, especially the challenges that remitters face within the regulatory environment. In order to facilitate dialogue and results on this topic in a structured way, it was suggested that efforts to reform the regulatory environment be focused regionally. • The continued implementation of the General Principles for International Remittance Services, which seek to improve the market for remittances in sending and receiving countries. • The adoption of standards for national remittance databases.

29. PPP Goals Thank you Payment Systems Development Group The World Bank mcirasino@worldbank.org jgarciagarcialun@worldbank.org mguadamillas@worldbank.org