Gov’t ex­pected to save over $200M per year with planned e-funds trans­fer sys­tem

Stabroek News Sunday - - BUSINESS PAGE -

With the creation of an Elec­tronic Funds Trans­fer (EFT) sys­tem, gov­ern­ment stands to save in ex­cess of $200 mil­lion an­nu­ally by in­creas­ing the use of elec­tronic pay­ments, ac­cord­ing to the Na­tional Pay­ments Sys­tem De­vel­op­ment Plan (NPSDP).

A 2015 pay­ments cost study con­ducted by the World Bank’s Pay­ment Sys­tems De­vel­op­ment Group found that gov­ern­ment could save up to GYD $266 mil­lion (0.04 % of Gross Do­mes­tic Prod­uct) an­nu­ally by switch­ing from pa­per-based pay­ment mech­a­nisms to elec­tronic pay­ments.

Ac­cord­ing to the NPSDP, which was which was pub­lished by the Bank of Guyana (BoG) in March, the Ac­coun­tant Gen­eral’s of­fice, which op­er­ates the In­te­grated Fi­nan­cial Man­age­ment and Ac­count­ing Sys­tem (IFMAS), is very keen to move to fully-elec­tronic pay­ments from IFMAS but this is not cur­rently pos­si­ble due to there be­ing no Au­to­mated Clear­ing House (ACH) func­tion for elec­tronic credit trans­fers.

As a re­sult, the BoG has an­nounced plans to in­tro­duce an EFT sys­tem in mid2018 as an ex­ten­sion of the Na­tional Cheque Clear­ing House (NCCH) sys­tem which is cur­rently in place.

“This will pro­vide ACH func­tion­al­ity for clear­ing di­rect credit and di­rect debit trans­fers. Fur­ther, com­mon risk mit­i­ga­tion prac­tices, such as liq­uid­ity man­age­ment tools and fa­cil­i­ties, are not avail­able to par­tic­i­pants in the ex­ist­ing sys­tem,” the plan notes.

The plan iden­ti­fies three ob­jec­tives of the pro­posed Na­tional Pay­ment Sys­tem (NPS) which re­late to elec­tronic trans­ac­tions: ex­pand­ing the ac­ces­si­bil­ity of elec­tronic pay­ment ac­cess net­works; at­tract­ing higher rates of elec­tronic pay­ment ac­cep­tance by ven­dors, mer­chants and other providers of goods and ser­vices; and ad­vanc­ing the mi­gra­tion of gov­ern­ment to elec­tronic pay­ments for both the col­lec­tion and dis­burse­ment of funds.

In ex­plain­ing the back­ground of these ob­jec­tives, the BoG ex­plains that the cur­rent sys­tems have sig­nif­i­cant gaps in their in­fras­truc­ture.

“There are spe­cific le­gal pro­vi­sions for in­ter­na­tional re­mit­tance ser­vices [but] there are no statu­tory or reg­u­la­tory pro­vi­sions to gov­ern a range of other pay­ment ser­vices and pay­ment mech­a­nisms,” the plan notes, while ex­plain­ing that there are no statu­tory pro­vi­sions on elec­tronic trans­ac­tions, in­clud­ing the elec­tronic pro­cess­ing of cheques and the use of trun­cated or elec­tronic cheques.

“There are no pro­vi­sions on credit trans­fers, ei­ther pa­per-based or elec­tronic, or on elec­tronic debit trans­fers. No sec­ondary mea­sures ex­ist on cards, ei­ther credit or debit, or on e-money in­stru­ments,” it adds, be­fore con­clud­ing that apart from the spe­cific pro­vi­sions on in­ter­na­tional re­mit­tances, the law is silent on whether non-banks are al­lowed to of­fer other pay­ment ser­vices. In the ab­sence of such pro­vi­sions, the pro­vi­sion of do­mes­tic re­mit­tances and bill pay­ment ser­vices by Money Trans­fer Agen­cies falls com­pletely out­side le­gal and reg­u­la­tory frame­work, and thus, out­side the reach of BoG over­sight.

In order to achieve this ob­jec­tive the BoG will over the next four years put into place sev­eral as­pects of miss­ing in­fras­truc­ture in the medium term (2018-2021) as part of nine spe­cific ac­tions to be taken to re­alise the set ob­jec­tives.

The first of these ac­tions re­quires the en­act­ment of a ro­bust NPS Act (NPSA) and a re­vi­sion of the Bank of Guyana Act.

The pro­posed NPSA, which is be­fore the Na­tional As­sem­bly, will le­galise the sys­tem and al­low for the BoG to li­cense in­sti­tu­tions to op­er­ate elec­tronic funds trans­fer ser­vices.

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