Developing payments in Iraq

The RPSI developing payments in Iraq

Phil CorperExecutive Payments Advisor, CBI

December 2015

Central Bank of Iraq

Payments vision

The Central Bank of Iraq has been working

since 2004 to develop and integrate its

payments infrastructure through:

• Legal and regulatory frameworks

• Telecommunications network

• Payments 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 components


Benefits of the payment systems

The Iraqi payment systems provide major

benefits to the banks, businesses and people

of Iraq

• Holistic information about cash

management

• Maintain the confidentiality of the

information and reduce the risks of the

paperwork

• High value transactions and low value

transactions processed quickly, securely

and transparently

• Connects all banks directly to CBI

• Reduces dependency on banknotes and

instruments

• Improves the climate for investment in

Iraq.


Payments achievements

In its quest to achieve its primary goals, the CBI has

taken on several projects, including:

• Establishing an efficient and effective Payments

System.

• Achieving the requirements for automation of

currency counting, sorting and classification.

• Usage of the international payment techniques

SWIFT.

• Implement modern infrastructure, including:

• acquiring modern banking systems and

networks

• encouraging and compelling banks to

implement banking technology and core

banking systems.

• Modernization of the banking operations according

to international standards in the practices of

electronic banking through the acquisition of the

National Switch and Mobile Payments.

Bank Bank

Customer Customer

Iraqi

Payment

Systems

Individuals

Businesses

Government

Individuals

Businesses

Government

Wholesale and inter-bank payment systems

Creation

Electronic wholesale and inter-bank payment systems

implemented components in Iraq:

• RTGS – Real Time Gross Settlement for high value

and urgent payments in real-time - implemented in

2006

• 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

• CSD – Central Securities Depository registration of

the securities issued by CBI and MoF implemented

in 2008

• RPSI – Retail Payment System Infrastructure –

currently in progress

PKI

RTGS

CACH CSD

Inter-bank clearing and settlement

Payment systems are integrated

using PKI (Public Key Infrastructure)

encryption

The Iraqi Inter-Bank Network

Creation

• The CBI built the IIBN in partnership with the

World Bank, the Ministry of Communications

and the Media and Communications

commission

• The IIBN uses Wi-MAX which is one of the

modern generations of communications and

high bandwidth technology to transmit high

volume data in between digital devices and

computers and to control the banks data since

2008

• The number of the main branches of the

banks connected to the IIBN were 25 banks in

2008 and it has increased to 48 banks until

now( the network also connect the Ministry of

Finance, the General Commission of Taxes

and The General Commission of Customs)

• Preparations are underway to contract to

develop the plans and designs for the future of

banking network, which will use fiber-optic

technologies instead of wireless technologies

cheques banknoteselectronic

payments

mobile

payments

20,700,000

96% of Iraqi adults

have

no current account

3,000,000

13% of Iraqis

have limited access

to electronic

payments

Amwal, TBI, etc.

50,000

0.2% have

payment cards

900,000

4% of Iraqi adults

have current

accounts

7 state banks

18 quoted private

banks

(21,600,00 adults)

26,000,000

>75% of Iraqi

adults

have mobile

phones

(many have more

than one phone)

Asiacell, Korek,

Zain

PresentPast

Building the Iraqi

Payment Systems

will enable Iraqi

banks, businesses

and people to ‘leap

frog’ to the latest

technology and

services

Retail Payment Systems Infrastructure

Background


Objectives

The RPSI will:

• Ensure that every Iraqi has at least one

payment card

• Deploy PoS throughout Iraq

• Encourage mobile payments and

transfers

• Link mobile wallets with bank accounts

• Reduce the use of cash and cheques

• Monitor and verify all transactions

electronically


Benefits

The RPSI will provide:

• Financial inclusion

• More customers, increased customer

service, more profit

• A wide range of channels and devices

• Phones and agents to extend bank

branch networks

• Open access to a shared platform

• A reduced cost of participation

• Increased competition on a level

playing field

• A world class integrated payment

system

Many-to-many model

Iraq Wallet


Creation

A pilot of the RPSI started in Autumn

2015:

• 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 cleared and settled in

Iraq

Participation will be universal after the

pilots

PKI

RTGS

CACH

Settlement

Net

IIMPs

CSD

INRS

Acquiring

banks

Card

transactions

Issuing

banks

Authorisation

and clearing

Mobile payment

providers

PKI


IRNS design

RTGS

Settlement

NetINRS

Acquiring banks

processing

agents

Card

transactions

Issuing banks

processing

agents

Authorisation

and clearing

• All payment cards must be EMV smart

cards and able to be used at all ATMs

and POS in Iraq

• Accessible from card enabled bank

accounts

• 24x7 switching of ATM, POS, mobile,

Internet and IVR initiated transactions

• Iraqi dinars

• Settlement must be via the Real Time

Gross Settlement System (RTGS)

• Card issuers must have on-line

systems which authorise transactions

against real time balances

ATMs POS

Cardholders

Statements

PKI


Integration with the IIMPS

RTGS

Settlement

NetINRS

Acquiring banks

processing

agents

Card

transactions

Issuing banks

processing

agents

Authorisation

and clearing

The INRS and IIMPS will be fully

integrated so that:

• Transactions can be exchanged

between conventional accounts

and mobile payment accounts (m-

accounts) via the Cheque-enabled

Automated Clearing House (CACH)

• Conventional EMV (EuroPay,

MasterCard, Visa) cards can be

linked to m-accounts giving mobile

payment users access to

conventional ATMs and POS

ATMs POS

Cardholders

Statements

IIMPS

CACH

Low value

paymentsMobile payment

providers

PKI


IIMPS services

RTGS

Settlement

NetINRS

Acquiring banks

processing

agents

Card

transactions

Issuing banks

processing

agents

Authorisation

and clearing

Mobile payments will provide a wide

range of multi-channel services to

mobile phone users who do not need

a conventional bank account

• m-account to m-account

payments, bill payment, air time

up, loyalty scheme transactions

• Payroll, direct debits and direct

credits from conventional

accounts

• Internet transactions

ATMs POS

Cardholders

Statements

Mobile

Payment

System

CACH

Internet

Mobile

phones

Low value


providers


High availability, performance and resilience

Iraqi Payment Systems have been designed to

ensure high availability, performance and

resilience:

• 24x7 availability at 99.98% level

• Fast response times average 4-5 seconds,

maximum 10 seconds, end-to-end

• Fully mirrored disaster recovery with automatic

re-routing if there is a failover

• Maintenance agreements with vendors

This is despite physical infrastructure challenges

which include unreliable electricity supplies, poor

access to skilled staff and security concerns

CBI

production

systemsCBI hot

standby

systems

CBI cold

standby

systems

Iraqi Inter-

Bank NetworkContingency

and resilience

Payment

Service

Provider

Payment

Service

ProviderPayment

Service

Provider


AML

The RPSI is part of a complete control framework:

• The CBI has complete oversight over all Iraqi

Payment Systems and regulates all Payment

Service Providers (PSPs)

• The RPSI and other payment systems have

built-in Anti-Money Laundering (AML) and

Countering the Financing of Terrorism (CGT)

monitoring systems

• AML and CFT processes include thorough

Know Your Customer (KYC) checks to verify

the identity of all bank account, mobile

account and card holders

Screening

Watch list filtering

Profiling

Behavioural

analysis

Know Your Customer

Verification of customers

and accounts


Electronic Payment Services Regulation

• The Electronic Payment Services

Regulation has been approved by the

Council of Ministers

• The CBI has issued the RPSI System

Rules which include detailed technical

instructions and financial instructions to

Payment Service Providers (PSPs)

• The first PSPs have been approved:

– Al-Iraqia Money Transfer Company

and Al-Taif Money Transfer Company

for card payments

– AsiaHawala and Iraq Wallet for mobile

payments

The Council of Ministers approves the

Electronic Payment Services Regulation


Initial participants

• All card and mobile PSPs

including banks must participate

in the RPSI

• The first card participants are live

in the pilot:

– Amwal (POS)

– Ashur Bank

(cards and ATMs)

– Trade Bank of Iraq

(cards, ATMs, POS)

• The first mobile PSPs are

preparing to test:

– AsiaHawala

– Iraq Wallet

PKI

RTGS

Settlement

NetINRS

Card acquirers

Card

transactions

Card Issuers Authorization

and clearing

Mobile

Payment

System

CACH

Low value


providers

Iraq Wallet

CBI is encouraging migration to electronic

payments with several initiatives:

• Encouraging ministries and state owned

institutions to use private sector banks and

PSPs for payments

• Supporting the e-Dinar scheme to facilitate

card based payments to and from ministries

and state owned institutions

• Developing an automated clearing system to

facilitate processing transactions between

ministries and institutions.

• Developing a securities trading system

(related to the CSD) for secondary markets.

• Participating in the Arab regional payment

system


Initiatives to engage with and support the state sector


Conforming to international standards

CBI will introduce and enforce compliance with

international standards for card payments

including:

• Unifying security features for cheques

• Migrating card based card payments to the

Eurocard MasterCard Visa (EMV) smart

card standard.

• Introducing International Bank Account

Numbers (IBANs)

• Introducing Issuer Identity Numbers (IINs)

for all international and local cards in Iraq

and becoming the Authority to allocate IINs

for all local cards


Participants’ next steps

Participants must prepare now:

• Prepare participant systems for integration

testing with the RPSI

• Bring core banking systems on-line to

enable authorisation of card transactions

against real time balances

• Launch customer education and

marketing campaigns to increase use of

electronic card and mobile payments

• Increase acceptance by expanding POS,

ATM and agent networks

• Adopt EMV, IBAN and IIN standards

Summary

• The successful implementation of wholesale and inter-

bank systems, and the installation of core banking

systems, has laid the foundation for the introduction

and growth of modern banking services in Iraq

• The RPSI will bring electronic payments to consumers

and businesses, leading the migration from cash and

driving economic growth

• Effective partnership with leading technology vendors

and strong project management will be used to ensure

success in Iraq’s challenging operating environment

• CBI will continue to cooperate with everyone through

studying the experiences of other countries and

international organizations and this will contribute in

reducing differences and take advantage of the

accumulated experiences in order to avoid obstacles.

• CBI will share the acquired experiences and the

ongoing training and the active and continues follow-

up with the banks to help them, step by step and

provide the advice.

Developing payments in Iraq

Documents

Transcript of Developing payments in Iraq