One Day Module for the banking industry
By
Syed Irfan Ali
Director State Bank of Pakistan
SBOTS
Payment System Module
One Day Payment Systems Module
TIMING
09:00 – 11:00
11:00 – 11:30
11:30 – 13:30
13:30 – 14:30
14:30 – 15:30
TOPICS
Payment
SystemEvaluation
SUMMARY
Evaluation of Payment System

What are Payment systems?

Why they are important?

Types of Payment Systems
 High Value Payment Systems
 Real Time Gross Settlement (RTGS)
 Retails (Small Value) Payment Systems
 Systems (ATMs Shared network , Direct debit &
Credit)
 Instruments ( Cheques and other Paper based
instruments, ATMs, Debit and Credit Cards )
 Channels (ATMs, POS, Internet and Mobile Banking,
Call Centers, Bank Branches, Real time online
Branches(RTOB)- Virtual Electronic Channels
Institutional
Framework
&
Clearing and
Settlements

TRAINER
TEA BREAK
Institutional Framework
 SBP & SBP BSC(Banks)
 An overview of Globus at SBP
 Banks & Their Branch Net work, Real time online
Branches(RTOB)
 Pakistan Banker Associations(PBA)
 National Institutional Facilitation Technologies
(Pvt.) Limited(NIFT)
 Central Depository Company of Pakistan Limited
(CDC)-The National Clearing Company of Pakistan
(NCCPL)

Clearing & Settlements
 Banks Settlement Accounts with SBP
 Funds Clearing and Settlement
 NIFT-Retails Clearing house (Collection to Clearing
Position, Their settlement in RTGS)
 Switches-1link & Mnet (Clearing Position-Data Entry
in Globus –RTGS)
 Globus and Its interface with RTGS
 Securities Clearing and Settlement
 Overview of Securities Settlement
 Government Securities Clearing and Settlement
 PIB/MTB/Sukook Unit (SBP BSC(Bank))
 KSE-Private Securities Clearing and Settlement
LUNCH BREAK
E-Banking & ECommerce:




E-Banking & E-Commerce:
E Banking Infrastructure
E-Banking Instruments and their
Risks in E-Banking and E-Commerce
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SBOTS
Payment System Module




15:30 – 16:00
16:00 – 17:00
Advantages and Disadvantages
PKI
E-Money
Interoperable Switches-1link & Mnet and way
forward to e Payment Gateway
Automated Clearing and Cheque Truncation (Going
forwarded –Electronic Cheque Clearing
TEA BREAK
 Payment Systems Reform
in Pakistan


PSD Initiatives
Cheque Truncations, e Payment
gateway ,Vision Development
Further Reading List for Payment System
Publishers/Author
Title
Bank for International Settlements
A glossary of terms used in payments and settlement systems
Bank for International Settlements
Core Principles for Systematically Important Payment Systems
World Bank
Payments and Securities Settlements systems in Pakistan-
SBP
Annual and Quarterly Reports
Syed Irfan Ali A profile
Mr. Ali’s career beginning in 1992 is a blend of banking and regulatory experience including
two and a half years in the National Accountability Bureau. He has worked extensively on
policy making and inspection and has remained the Director of Banking Inspection, Banking
Policy and Payment Systems.
His new passion is payment systems with a vision to transform the payments landscape of
Pakistan and has conducted a number of seminars and modules on the payment systems for
the financial industry. Mr. Ali is an MBA from LUMS and is a certified anti money
laundering specialist, associate member of the Association of Certified Fraud Examiners
since 2006 and member Global Association of risk professionals since 2010.
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Payment System Module
Payment Systems – Brief Description
A payment system is a set of processes and technologies that transfer monetary value from one entity or
person to another. Payments are typically made in exchanged for the provision of goods, services, or to
satisfy a legal obligation. They can be made using a variety of methods such as cash, checks, electronic
payments and cards in a variety of currencies. The essence of a payment system is that it uses cashsubstitutes, such as checks or electronic messages, to create the debits and credits that transfer value. The
value that is being transferred is stored in depository accounts at banks or other types of financial
institutions. The banks, in turn, are connected to a set of payment systems that they use to process payments
on behalf of their customers or depositors.
The payments system in Pakistan is characterized by the use of credit transfers for interbank large-value
payments and a cheque-based system for customer payments (retail payments).
1- PRISM System (Real Time Gross Settlement System)
PRISM is the core element of Pakistan’s high value payment system infrastructure. It was launched by
the SBP in July, 2008 as a fully automated Real Time Gross Settlement (RTGS) system. PRISM is
designed to handle all large-value payments as well as government securities transactions in the country.
It has two components, namely Cash Component and Securities Component. The payment component of
PRISM settles payments resulting from interbank money market; securities market transactions, foreign
exchange transactions and net settlement positions of the cheque clearing. The second component of
PRISM is a securities settlement system for government securities transactions resulting from
sale/purchase of MTBs and PIBs in the primary and the secondary market.
PRISM System executed 431 thousand transactions amounting PKR 137.5 trillion in 2012.
PSD also performs the following tasks while facilitating PRISM System operations:
- Multilateral Net Settlement Batches (MNSB) are settled in PRISM four times a day
- Service Bureau Facility is provided to banks in case of failure of banks’ PRISM clients
- Discounting, securities maturity, secondary market transactions etc all are facilitated through PRISM
system
2- Retail Payment System
Retail Payment Systems is comprised of high volume and low value transactions which are executed
through paper based and electronic instruments and modes namely checks, payment orders, ATMs, IBFT
etc. In retails payments, PSD oversees and supervises switches, NIFT (the clearing house), banks ATM
and Alternate Delivery Channel (ADC) infrastructure. In Quarter 2, FY2013 79.4 million transactions
through e-banking channel were executed amounting Rs. PKR 7.5 trillion.
PSD also facilitates e-Banking disputes resolution in coordination with Consumer Protection Department
(CPD. Moreover, PSD also compiles report on e-Banking and reviews fraudulent transaction status
reported by the commercial banks.
3- International Bank Account Number (IBAN)
IBAN is an international standard for identifying bank accounts across national borders with a minimal
of risk of propagating transcription errors. The standard has already been implemented in more than 50
countries including EU, Saudi Arab, Kuwait etc. PSD issued guidelines for banks to comply with the
standard in May 2012. The banks have complied with Phase 1 of IBAN implementation in January 2013
where banks have generated and notified their customers about the new IBAN standard. Moreover,
banks will be able to comply with Phase 2 by December 2013 whereby they will be able to operationally
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Payment System Module
use IBAN (i.e. capture, recognize, process, validate and transfer). It is important to mention that Pakistan
would be among the few countries which would be able to implement IBAN standard in a very short
span of time.
4- Payment Gateway
PSD is currently in the phase of developing guidelines for Payment Gateway. A payment gateway is an
e-commerce application service provider to authorize payments of e-businesses by acting as an
intermediary between an acquiring institution and the issuing institution. The entire process of
authorising an e-transaction is completed within a few seconds.
In the absence of a payment gateway, switches operating in Pakistan, viz. 1-Link (Guarantee) Limited
and M-Net (Pvt.) Limited, have been facilitating transfer of payment details between e-channels to
authorize e-transactions using debit, credit and prepaid cards.
5- Check Truncation
To meet the purpose of truncation in Pakistan, a Cheque Truncation Committee (CTC) was formed with
consultation of PBA for an efficient processing and clearing of cheques to convert original paper
cheques into electronic images. So far, six meetings of CTC had been held to prepare a road map for
Cheque truncation System in Pakistan.
CTC has decided to implement CTS in following two phases:
- Partial Truncation ( to be implemented by December, 2013)
- Full Truncation ( to be implemented by December, 2014)
The 1st (Pilot) phase of CTS is web marking to make Pay/No pay decision electronically (Inward
Clearing). This can be achieved with a very small investment by the participating banks and will
improve the overall efficiency of the clearing system.
6- SAARC Payment Initiative (SPI)
PSD also facilitates SPI forum in coordination with the other SBP departments. The tasks include:
-
Carryout stock taking exercise of Payment and Settlement Systems (PSS) in the region
Assess volume of cross border remittance payments in member countries;
Initiate to set up a National Payment Council (NPC)/ Committee in each member country
Conduct conferences/ seminars; publish SAARC Payments Bulletin and its own website to convey
the developments in PSS in the SRRAC region and its future endeavors;
Develop Payment System Matrix (PSM) consists of member countries important payment systems
electronic mechanisms, instruments and settlement mechanisms etc. in order to help member
countries to better understand while communicating with each other and to bring their internal
systems and procedures at par.
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