a future with e-cheques
DESCRIPTION
A Future with E-cheques. Hong Kong General Chamber of Commerce Financial & Treasury Services Committee Roundtable Luncheon. Mr. Shu-Pui Li Head, Financial Infrastructure Development Division Financial Infrastructure Department Hong Kong Monetary Authority 23 June 2014. Agenda. - PowerPoint PPT PresentationTRANSCRIPT
A Future with E-cheques
Mr. Shu-Pui Li
Head, Financial Infrastructure Development Division
Financial Infrastructure Department
Hong Kong Monetary Authority
23 June 2014
Hong Kong General Chamber of Commerce
Financial & Treasury Services Committee Roundtable Luncheon
22
Agenda
Introduction of e-cheque
Key drivers for the development of e-cheque
Nature and benefits of e-cheque
High-level operating model
Security features of e-cheque
Business cases for corporates to use e-cheque
Introduction of e-cheque
44
Need for an alternative of paper cheque
Resource intensive and costly for banks to process cheques
(Hong Kong banks need to spend up to HK$1.7 billion a year on
processing cheque)
Increasing challenge for banks due to a wider usage of RMB
cheques (e.g. for RMB IPO and RMB insurance policies)
Paper based meaning not environmental-friendly
Not convenient to use as it requires physical delivery and
presentment
55
E-cheque
e-cheque: issued, delivered and presented electronically
Key features:
bill of exchange under the Bills of Exchange Ordinance (BOEO)
non-negotiable and non-transferable
digitally signed by payer and certified by payer’s bank
support HKD, USD and RMB denominated e-cheque
Target launch date: 2H 2015
66
Benefits of e-cheque
Retain all basic features and benefits of paper cheque and with the following additional benefits:
remove the need for physical delivery and presentment
carry enhanced security features
remove the costly and manual processing of paper cheque
Possible to expand to cross-border usage in the future
overseas residents with bank accounts in Hong Kong can easily issue and present e-cheque
Potentially cross-border cheque collection service can be facilitated by e-cheque
7
PayeePayer
Payee’s BankPayer’s Bank
Clear and settlee-cheque
E-cheque Flow(for banks which provide e-cheque issuance and presentment services on their own)
HKICL
Verify signature,
payee identity and
credit deposit
Createe-cheque
Digital signed
e-cheque
through Internet
Banking or other
authenticated means
Request for issuing
e-cheque
Digital signed
e-cheque
Digital signed
e-cheque
Presente-cheque through Internet
Banking or other means
Outward clearing file and signede-cheques
Inward clearing file and signede-cheques
Alternatively, payer can send e-cheque to payee via email (if payer wishes to send e-cheque to payee, probably together with
other documents)
Verify signature, internal records and check for
duplicate presentments
Digital signed
e-cheque
Send e-cheque to payee by payer’s bank by email
2
4B
5
7
3
6
14A
9
8
8
PayeePayer
Payee’s BankPayer’s Bank
Clear and settlee-cheque
E-cheque Flow (for banks which ride on HKICL’s centralized e-cheque presentment portal to provide presentment service to their customers)
HKICL/ Centralized Presentment
portal
Verify payee identity
and credit deposit
Createe-cheque
Digital signed
e-cheque
through Internet
Banking or other
authenticated means
Request for issuing
e-cheque
Digital signed
e-cheque
Presente-cheque and input
payee’s bank details through centralized
portal
Outward clearing file and signed
e-cheques
Inward clearing file and signede-cheques
Verify signature, internal records and check for
duplicate presentments
Digital signed
e-cheque
2
5
7
3
6
1
10
98
Verify signature
Alternatively, payer can send e-cheque to payee via email (if payer wishes to send e-cheque to payee, probably together with
other documents)
Send e-cheque to payee by payer’s bank by email
4B
4A
99
Animated video and Prototype demo
Link to animated video
Link to prototype demo
1010
Security measures
Virtual cheque book: Avoid unauthorized access to cheque books
2 factor authentication (2FA): Protect bank customers from
internet banking fraud
Digital signature using PKI technology: Ensure the integrity of e-
cheque
E-cheque issuance records: Allow payer bank to check the
presented cheques against its own issuance records
Centralized presentment service: Guard against duplicate
presentment
1111
Use of PKI technology in e-cheque
E-cheque will be signed using the digital certificate issued by one of
the recognized Certification Authorities
Two types of digital certificate can be used:
General purpose or personal digital certificate
Safe kept by the owner; can be used for all purposes
Special purpose digital certificate
Safe kept by payer’s bank; can be used for e-cheque and other banking
services of that payer’s bank
1212
Progress made
System development under way
Based on survey results, most retail banks have indicated interest
to offer e-cheque service to their customers
Marketing campaigns will be organised closer to the service launch
Overall speaking, the project is progressing as planned
It is our target to launch the service in 2H 2015
Business cases for corporates
to use e-cheque
1414
Cost and benefit analysis for corporates to use e-cheque
Costs
Bank fees: based on our understanding, banks are not going to levy
any fees for their customers to use e-cheques, except for bulk issuance
which will also be less costly than that of paper cheques
Internal costs: Nil as corporates can easily issue and present e-
cheques through internet banking platforms
Benefits
Easier to do reconciliation based on electronic records
Enhanced processing efficiency due to automation
Possible cost saving for bulk cheque issuance
The benefits of using e-cheque substantially outweigh its costs!
1515
Case 1: Issuance of IPO refund cheques
Paper cheques E-cheques
From issuers’ perspective
Time needed to issue IPO refund cheques
More time needed for cheque printing and mailing
Shorter time needed to issue e-cheques
Costs involved Processing, printing and mailing costs
Significant cost saving for using e-cheques (as there is no printing or mailing cost)
From IPO subscribers’ perspective
Time needed to receive IPO refund cheques
1-2 days after refund day due to postal delay
Shorter time needed to receive e-cheques (i.e. likely for them to receive e-cheques on refund day)
1616
Case 2: Collection of cheque payments
Paper cheques E-cheques
From corporates’ perspective
Efforts needed to do reconciliation (e.g. checking against invoice amount and due date)
Substantial efforts needed Minimal efforts needed
Presentment cut-off time
Cheques presented at or before 5pm on a business day will mostly be treated as same day clearing. Cheques presented after 5pm will be treated as next day clearing
Possible for banks to extend the presentment cut-off time to 7pm or 8pm, thus providing a longer window for e-cheque deposit for same day clearing and allowing corporates to receive good funds earlier
Q & A