m Monetics

Iraqi payment systems

support for successful

projects in Kurdistan

m MoneticsReview, planning, project management

Banking & payment systems, mobile, cards, e-banks

10 June 2014

Philip Corper

Executive Associate

m Monetics

The CBI strategy has five key objectives

• Stabilise the exchange rate

• Implement the monetary policy

efficiently

• Manage foreign reserves

• Issue and manage the currency

• Control the banking sector to

promote a competitive and

stable financial system.

2

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Technology is central to implementing the CBI strategy

The Central Bank of Iraq has been

working since 2004 to develop and

integrate its technology infrastructure

through:

• Legal and regulatory frameworks

• Communication network

• Modern systems

• Global standards

• Capacity building

The CBI approach and vision is

becoming a role model for other Iraqi

government institutions on how to

cooperate to integrate e-governance

components3

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There are four components to the Iraqi Payment Systems

• RTGS – Real Time Gross

Settlement for high value and urgent

payments in real-time –

implemented in 2006

• CSD – Central Securities Depository

registration of the securities issued

by CBI and MoF implemented in

2008

• CACH – Cheque Enabled

Automated Clearing House for lower

value, bulk payments and cheques –

implemented in 2008

• Electronic Cheque Clearing system

– implemented by private banks in

2011 and by State-owned banks in

2013

• RPSI – Retail Payment System

Infrastructure – currently in progress4

PKI

RTGS

CACH CSD

Inter-bank

clearing and settlement

Payment systems are

integrated using PKI

(Public Key Infrastructure)

encryption

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Wholesale payment systems were the first priority

• The wholesale and inter-

bank payment systems are

critical enablers which

underpin the whole banking

and economic system in

Iraq

• Low payment volumes

indicate low banking and

economic activity–Iraq

remains a ‘cash economy’

• Volume will increase by:

• Mandating migration from

cheques to electronic

payments

• implementing retail

payment systems and

making them universally

available5

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2011 2012 2013

Transactions per year

Wholesale payment volumes

RTGS

CACH -cheques

CACH -electronicpayments

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Retail payment systems will dominate the future

Building the Iraqi

Payment Systems

will enable Iraqi

banks, businesses

and people to ‘leap

frog’ to the latest

technology and

services

6

cheques banknoteselectronic

payments

mobile

payments

20,700,000

96% of Iraqi

adults have

no current

account

50,000

0.2% have

payment cards

900,000

4% of Iraqi adults

have current

accounts

(21,600,00 adults)

32,000,000

>97% of Iraqi

adults

have mobile

phones

(many have

more than one

phone)

PresentPast

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The Retail Payment Systems Infrastructure project

• Pilots of the RPSI will start in

Summer 2014:

• INRS – Iraqi National Retail

Switch will support EMV smart

card transactions via ATMs, POS

and the Internet

7

PKI

RTGS

CACH CSD

INRS

Acquiring

banks

Issuing

banks

Net

settlement

Transactions

Authorisation

& clearing

POSATMs

Card

holders

Internet

portal

m Monetics

The Retail Payment Systems Infrastructure project

• Pilots of the RPSI will start in

Summer 2014:

• INRS – Iraqi National Retail

Switch will support EMV smart

card transactions via ATMs, POS

and the Internet

• IIMPS – Iraqi Interoperable Mobile

Payment System will support

mobile payments without

depending on conventional banks

accounts

• The RPSI will be interoperable

with mandatory national standards

• All transactions will be cleared

and settled in Iraq

• Participation will be universal after

the pilots

8

PKI

RTGS

CACH

Mobile

Networks

CSD

IIMPS

INRS

Acquiring

banks

Issuing

banks

Net

settlement

Transactions

Authorisation

& clearing

POSATMs

Card

holders

Internet

portal

Call centre &

Interactive Voice

Response system

Mobile

phones

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The Iraqi Payment Systems depend on telecommunications

• The CBI built the Iraqi Inter-

Bank Network (IIBN) in

2008

• The IIBN uses Wi-MAX high

bandwidth technology to

transmit high volume digital

data between banks

• 48 banks are connected, as

well as the Ministry of

Finance, the General

Commission of Taxes and

The General Commission of

Customs

• The IIBN is being upgraded

to support the RPSI and to

install fibre-optic links

alongside existing wireless

microwave links9

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The CBI is reforming banking laws and regulations

• The CBI is leading revision

of the banking laws:

• CBI Law

• Banking Law

• Anti-Money Laundering

Law

• The Electronic Payment

Services Regulation has

been approved by the

Council of Ministers

• The CBI will now issue

detailed technical

instructions and financial

instructions to Payment

Service Providers (PSPs)

• The CBI has issued the

credit information

instructions10

The Council of Ministers approves the

Electronic Payment Services Regulation

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Development of Iraqi Payment Systems is continuing

Additional projects are under

way to modernise and sustain

the Iraqi Payments Systems

• An national International Bank

Account Number (IBAN)

standard is being introduced

• An automated clearing system

will facilitate processing

transactions between

ministries and institutions

• Iraq will participate in the

regional payment system of

the Arab Monetary Fund

• Security features of cheques

are being upgraded

• The security features and

durability of bank notes are

being upgraded11

• SPARK optical

features

• Dynamic ink

colours

• Magnetic

threads

• Protective

films

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The CBI is also improving security and managing risk

• Anti-Money Laundering (AML)

and Countering the Financing of

Terrorism (CFT) processes are

in accordance with the

standards

• A national Credit Information

Bureau (CIB) is being built

• All CBI systems comply with

international standards, are

resilient and have backup,

disaster recovery and business

continuity facilities and

processes

12

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The CBI is continuing to modernise itself and Iraqi banks

Additional projects are under way

to modernise the Iraqi banks

• The CBI core banking system

will be replaced

• A securities trading system

(related to the CSD) is being

implemented

• Electronic financial reporting will

be introduced using XBRL

standards

• A Banking & Finance Academy

has been established in Erbil

and a Banking Studies Centre

in Baghdad

• New cultures are being

encouraged in banks which will

make use of the new skills

technologies and data13

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The Iraqi Payment Systems benefit all projects and businesses

• Processing high value transactions

and low value transactions quickly,

securely and transparently

• Connecting all banks directly to

CBI to support the exchange of

transactions

• Providing holistic information about

cash management

• Maintaining the confidentiality of

the information and reduce the

risks of the paperwork

• Reducing dependency on

banknotes and instruments

• Leading the migration from cash

• Diving economic growth

• Improving the climate for

investment in Iraq14

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The Iraqi Payment Systems will develop all regions’ economies

• The CBI and the banks have been

working to build modern payment

systems for a decade, with support

from US Treasury and USAID

• The basic infrastructure has been

in place for several years and is

proven

• Now the introduction of national

electronic retail payment systems

will move payment services

throughout Iraq to a new level

• People and businesses in all

regions of Iraq will benefit from

embracing the new system and

initiatives

• This will greatly aid the economic

development of the country and

regions.15