Latest updates on the cost reduction efforts at global level - Achievements and way forward -

Transcription

1 Latest updates on the cost reduction efforts at global level - Achievements and way forward - Isaku Endo Remittances Specialist Payment Systems Development Group Global Payments Week 2014, September 23-25, New York, NY

2 Remittance Prices Worldwide What have we achieved in the last five years? Global efforts led by the World Bank matched with interventions at the country level are bringing down the cost of remittance services: estimated US$ 48 billion saved Source: Financial Infrastructure Service Line elaboration on Remittance Prices Worldwide data 2

3 General Principles for International Remittance Services Why do we care about the cost? More money in the hands of remittance senders/recipients, typically migrant workers and their families Cost of sending remittances is an indicator of a safe and efficient international remittance services and markets Implementation of CPSS-World Bank General Principles for International Remittance Services (2007) and its impacts on remittance cost reduction Public Policy Objectives 5 General Principles Roles of Remittance Services Providers and Public Authorities 3

4 Examples of GP implementations and impacts Aus/NZ Cost Reduction by 2.9pp and 2.1pp, respectively with Send Money Pacific Indonesia: BI regulation on Consumer Protection Bangladesh: Banned exclusivity agreements and increased competition. 4.27% in 1Q2014 Mexico: Banned exclusivity agreements and increased competition. 4.51% in 1Q2014 GP1 T&CP GP4 Comp MKT US Dodd-Frank Act to increase transparency and consumer protection Brazil: Allowing Business Correspondents to pay out remittances UAE highly competitive market allowed a reduction of remittances around 4% US FinCEN s MSB website to support RSPs in compliance with regulation Sri Lanka Cost Reduction from 10% to 5% after NPS reform GP5 Gov Risk GP2 PSI Rwanda Cost reduction from 19% (2010) to 15% (2012) after NPS reform Malaysia: the professional and sound management of the industry by MSB Act and Principal Agent Role of RSP EU-PSD led to significant cost reductions in most European countries in RPW. US/Mexico: proportionate ID requirements contributes to competition among regulated RSPs - UK: Industry Code of conduct - Creation of Industry Associations: UK, US, Malaysia, Indonesia, Jamaica, Uganda GP3 Leg - Reg Japan Payment Services Act has led to increased competition and cost reduction by 3.34pp since the reform Role of Authorities - Italy: Public/Private Forum - Pakistan: Pakistan Remittance Initiative - Creation of interagency coordination: US, UK, South Africa, Japan, 4

5 The World Bank s role in Supporting Cost Reduction Objectives Priorities for Better Impacts Global Challenges and Solutions through Innovative Approaches Knowledge as a Public Good Innovation Leadership Publication of the Guidance Report with best practices Quarterly updates of RPW started in Q Knowledge dissemination: Policy Brief, Remittance Database Methodology (World Bank certification: e.g. most recently France) Outreach and awareness events and conferences (GPW, FI Week, Regional events, etc) Contributing to UN Post-2015 discussion on remittance cost reduction Innovation with Pick Remit to bring knowledge of remittance costs directly to consumers Project Greenback: raise awareness and promote best practices at the community level Project Greenback 2.0: Direct engagements with communities, local authorities and RSPs to make changes. Comparative Cost Analysis Framework: Measuring the social costs of retail payment instruments. Technical inputs to the G20 to shape the global agenda Secretariat of the Global Remittances Working Group Supporting partners in delivering their programs and achieving results (Better than Cash Alliance, IFC, FISF, etc.) 5

6 The World Bank s role in Supporting Cost Reduction Objectives Priorities for Better Impacts Regional Challenges and Solutions Africa Partnerships with Australia, the AIR Project and SADC Central Banks Growing number of diagnostics and TAs in the Africa region - Market and payment system infrastructures Send Money Africa Focusing on Remittances to Africa and intra-continent Partnership with IFAD for reforming Postal operators (risk assessment) and with IFAD/UPU on Postal Financial Services Eastern Europe Partnership with the Government of Austria to support Balkan countries, where remittance costs are high. Expansion of engagements in Balkans and Eastern Europe in the pipeline Asia (East, South, and Central) and Pacific Partnership with the Central Bank of Malaysia and the Malaysian Association of MSBs to co-organize a regional conference in May in Kuala Lumpur Responding to ASEAN commitments WB-ASEAN Initiative Reforms in remittance markets and payment systems in the Pacific Islands Latin America and the Caribbean Partnership with IADB and CEMLA EnviaCentroAmerica Supporting reforms in remittance markets and payment system infrastructures 6

7 remittanceprices.worldbank.org 7

8 Making Markets More Transparent: National and Regional Databases Remittance cost tracking serving migrants & policy makers around the world Increasing the relevance and number of national and regional databases on the cost of remittances because: o o o They serve the ultimate beneficiaries of the remittances: the migrants They cover more frequently the changes of the market They can serve as a benchmark for the conclusions of the RPW 8

9 Remittance Prices Worldwide - Global Trends Global Average and Global Weighted Average Global Average and International MTO Index 9

10 Remittance Prices Worldwide Remittance Corridors Corridors Shifting to Lower Cost Bands 10

11 Remittance Prices Worldwide G8 Countries 5x5 Objective Global Average 8.14% - G8 Average 7.54% Note: high volatility of foreign exchange rates against the US Dollars may result in higher costs. 11

12 Remittance Transfer by Remittance Product 12

13 Continuous Remittance Cost Reduction Efforts Impactful global target setting with highest political commitments (Sustainable Development Goals) Effective interventions to promote enabling remittance markets in order to reduce costs Global target and intervention Country level intervention through Implementations of CPSS-World Bank General Principles for International Remittance Services Municipality level intervention through champion cities Caveat: Unintended consequences of policy decisions 13

14 Thank you! 14

15 Annex 15

16 GPs lessons : GP1 Transparency and Consumer Protection Lesson Transparency and consumer protection are enhanced when consumers are provided with written and clear confirmation of transaction details, including fees, the foreign exchange rate and other attributes Lesson If transparency is to be effective, consumers need to have sufficient background knowledge to be able to understand the information provided and make informed choices Lesson Consumer remittance price databases may be an effective means to provide consumers with readily comparable information on the prices and other service features Lesson Effective, readily accessible mechanism for consumers to file complaints enhances the effectiveness of consumer protections and deepens confidence in regulated channels Lesson Industry-led initiatives can be an important complement to the official framework for resolving consumer disputes 16

17 GPs lessons : GP2 Payment System Infrastructure Lesson In deciding how non-bank RSPs are granted access to national (centralized) payment system platforms, regulators should weight the objectives of an efficient remittance market with the need for safety and reliability of the payments system. Lesson Regulators that work with banks and other RSPs to identify ways to mitigate and control risks may help facilitate non-bank RSPs continued access to payment services Lesson 2.2 Where financial institutions or payment networks are not present in rural areas and therefore large parts of the population remain un-served or under-served, regulators could encourage or incentivize RSPs to develop suitable infrastructure Lesson 2.3 Allowing non-bank financial services providers to participate in the remittance market may be important to achieve sufficient coverage. An enabling regulation may be needed to provide clarity on this respect Lesson 2.4 A regulatory and legal framework that enables and facilitates banks and other RSPs adopting new technologies is beneficial also to the development of the remittance market Lesson 2.5 A good practice is when public and private sector stakeholders support the development of centralized, open and interoperable remittance payment platforms 17

18 GPs lessons : GP3 Legal and Regulatory Framework Lesson Establishing at least basic prudential requirements for RSPs can help ensure that consumers are appropriately protected against financial losses Lesson Technology and business models for remittances are evolving fast. Regulation for RSPs and remittance services functions best if independent of specific technologies / business models Lesson 3.2 A good practice is when different types of entities are permitted to provide remittance services and the requirements applicable to them are proportionate to risks. In this context, regulations should be designed on the basis of the type of service rather than the type of institution Lesson 3.3 The social and economic circumstances of remitters and the small-value of remittances are important aspects to be considered when assessing the costs and benefits of regulations Lesson 3.4 Remittance markets of countries with remittance flows between them benefit if the countries understand each other s legal / regulatory framework for remittances and cooperate to increase consistency of regulation and the proper functioning of the market 18

19 GPs lessons : GP4 Market Structure and Competition Lesson 4.1 A functioning market requires that new RSPs are able to enter the market and establish distribution channels. A good practice is when anti-competitive arrangements are prohibited where they prevent a level of competition sufficient to ensure a functioning market. High prices may be an indication of a lack of competition Lesson 4.2 The ability to use relevant payment systems in the country effectively is a key operational requirement for RSPs and affects the competitiveness of individual RSPs 19

20 GPs lessons : GP5 Governance and Risk Management Lesson The remittance industry, in cooperation with the relevant authorities and consumer interest groups, can enhance confidence in international remittance services and protect consumers by establishing guidelines for and practicing good governance and appropriate risk management Lesson Authorities can effectively support RSPs by providing guidance on how to design appropriate risk management and governance programs. Often, the adoption of even basic risk management and good governance practices can lead to significant improvements Lesson Regulators can benefit from a better understanding of the actual risks associated with remittance operations and the operational procedures and business models involved Lesson Regulatory requirements relating to risk management and governance can be an important part of a licensing or other supervisory regime for RSPs 20

21 GPs lessons : Role A Remittance Service Providers Lesson When RSPs cooperate on infrastructure and compete on services, the market for remittances can work more efficiently Lesson The market as a whole may benefit from the sharing of experiences and good practices, and from leveraging capabilities between RSPs and other financial service providers Lesson 6.2 A good practice is when RSPs are actively and transparently providing information on the attributes and cost of their remittance services 21

22 GPs lessons : Role B Public Authorities Lesson 7.1 The remittance market and remittance policies benefit from cooperation between public authorities with responsibility for remittances Lesson 7.2 Public authorities have played a key role in supporting the implementation of the General Principles in many countries. Nevertheless, there is still a long way to go in many countries to achieve the public policy objectives of the General Principles. This will require the continuous involvement of public authorities 22