G2P Payments Spurring

Mobile Financial Services

6th Mobile Financial Service Asia Pacific

Summit 2012

Manila, Philippines 11th-12th September

Hotel Intercontinental

Santanu Sengupta Director, Corporate Affairs and Finance

ACMFI - African Centre for Mobile Financial Inclusion

santanu@acmfi.org/acmfi2010@gmail.com

Government-to-Person (G2P) Payments

Social Safety Net (SSN) Programs

Employee Payments (wages, pensions)

Social Transfers Noncash Support

Workfare

Unconditional Transfers

Conditional Transfers

Food

Price Subsidies

Fee Waivers

To better off employees

To low-income employees

17

0 m

illio

n

What are G2P payments?

Note: Data is from

2009, CGAP

Financial access and the 170 million

55% of adults worldwide—

2.5 billion people—survive without formal financial services.

They rely instead on:

Family members

Friends and neighbors

Savings clubs

Employers

Moneylenders and savings collectors

No formal

access

Formal

access

Illustration

,00,000

millions??

Channel Costs $250k Traditional

branch

$50k In-store branch

$10k ATM

$2k Agent with POS

terminal

$400 Agent with

mobile

$0k No agent

(cashless)

1.7 billion people worldwide have a mobile phone but no bank account.

Branchless models for scale and presence

The Case for Financial Inclusion

Case for Electronic Payments

to

WHO ALL ARE IN THE FRONT

Process & Procedures : Govt

• An appropriate legal framework with specific applicability to government payment programs can further underpin their safe and efficient operation:

• Laws and/or regulations that provide clarity and certainty to the various parties involved, and that promote effectiveness and transparency in the execution of programs should be enacted/approved.

Process & Procedures Cont

• Laws and regulations on payment instruments and systems, competition and consumer protection can also have an important bearing on government payment programs:

• the legal basis should support sound and fair practices in the market place, and be flexible enough to accommodate innovations

Transition to Electronic

• Identity, which is of paramount importance

• Biometrics, Multiple Authentication

• Ease of transaction

• Time saving: Operation

• Nearby : less travel time

• Interoperability

• Leads to Savings

• More transactions

• Moves on to Savings and Micro Insurance

ELECTRONIC Advantage

Payment System & Payment Structure

• Operators of government payment programs all around the

world are concerned that payments made by/to the government

are done safely, and that government money is managed

transparently and efficiently.

• An appropriate payments infrastructure should be in place: the

potential to obtain substantial benefits from migrating form the

cash based system

• Stops mis-impersonation

• Leakages

• Adds incentivisation

• Creative & Productive

• government expenditures and collections to electronic

payments relies on there being the required payments

infrastructures to process such payments safely, efficiently and

at a reasonable cost

Linking G2P to the Personal Payment Eco-System

Changes Over Time Towards Electronic Payments

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Type of Government Payment cont.

• Government-to-business (G2B) payments include payments related to the procurement of goods and

services, tax refunds, and disbursement of loans or business assistance.

• G2B payments are characterized by a large number of

transactions. The average value of G2B payments varies widely, ranging from large-value payments associated with large procurement contracts to small value payments to local businesses for ordinary operational expenses, for example urgent repair costs.

Type of Government Payment cont.

Person-to-government (P2G) and business-to government

(B2G) payments include payments made by consumers and businesses to government and/or public sector organizations in the form of tax payments and payments for obtaining services from these agencies (licenses, permits, etc.). Similar to G2P payments, P2G payments tend to be of a small-value nature, and are usually characterized by a very large of number of transactions. Likewise, B2G are a mirror of G2B payments with regard to average size and transactional

volumes (i.e. varying size and large number of payments).

The Treasury Model

• Government treasury offices/national treasuries (hereinafter “treasuries”) are normally responsible for managing the processes associated with the execution of the payments to/from the government. The way in which the government payments are organized and executed has been evolving over time and varies substantially across the world.

The Treasury Model • With regard to tax collections and other government • receipts, in some countries the associated P2G • and B2G payments can only be made directly with the • tax authority. In others, treasuries have adopted

programs • by which the commercial bank network and/ • or other agents can also be used for this purpose. The • money collected is normally centralized with the

government’s • financial agent, typically the central bank,8 • which holds accounts for the treasury and in some

cases • also for the relevant government agency or agencies • responsible for tax collections.

Treasury Model Cont

2010 Global Payment System Survey

• At the end of the 20th century, it was a common scenario in many

countries for taxes, duties and other payments to the government to be

paid only in cash at the premises of the agency responsible for tax

collections.

• In most cases, the commercial banking network was not used on a large

scale for this purpose until the 1990s.

• To a large extent this was possible by payment system and overall

technological innovations enabling commercial banks to provide the

required services to the government at a reasonable cost and with

appropriate service levels.

World Bank 2010 Global Payment Systems Survey

THE COST IMPLICATIONS

EVOLVING ECOSYSTEM

Ecosystem- 1- In Transition

People

Money Trans

People

Government

People

Bank

PeoplePeople

Business Centre

People

Shopping Mall

Emerging Ecosystem- 1

People

Money Trans

People

Government

People

Bank

PeoplePeople

Business Centre

People

Shopping Mall

How it is emerging

URBAN SCENES

Rural Scene

Data Centres

Who Plays what role

URBAN SCENES

Rural Scene

Data Centres

Citizens

TARGET CLIENTS / BENEFICIARIES

Govt

Business Centre

Money

Transactions

People

People Business

Centre

ILLUSTRIOUS MANIFESTATIONS

THE PATH BREAKERS

• Guaranteed 100 days work in almost all the back

ward districts in India in the Gigantic G2P

Programmes wishing to bring out huge

transformational changes across India

• Bolsa Familia in Brazil is still the front runner

amongst this segment in Impact

• Other Latam Countries following up along with

Africa

• In Asia other star performer in the making

Phlippines own 4p programme

4ps Programme in Philippines

Conclusion

• With the financial crisis deepening in EU & prolonging in

US new reengineering of services matrix emerging in

EMERGING MARKETS

• G2P payment with enhanced, targeted, sometimes

mandated policy initiatives in different emerging markets

• Profusion of converged infrastructure like Telecom,

Biometrics, scanner, card technology, POS , mini ATMS

area bounding

• Huge capacity building and change management

programmes in the offing and can usher in the

transformational changes

• A new driver of the economy ushers in the new DAWN

Conclusion

• In almost all impact analysis by world bank, CGAP & other institutions it has been recorded that the following few steps have been the most profound pall bearer for the success of the CCT.

These are : Replacement of Archaic law & regulations by more modern practical

enactment - Usage of ICT platform & enabling environment & electronic payment gateway - Delivery mechanism of cash to direct to the beneficiaries. - Attachment of conditionalities easily identifiable by the beneficiary to induce her/him to use - Multilayer propagation and capacity building programme to popularize the programmes for awareness development - Strong supervisory control at various levels so that the programme becomes a success story. Continuous up-gradation and changes to the initiated one following rapid transformation and changing needs of the beneficiaries.

SALAMAT

Thank You