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E-PAYMENT AND THEIR IMPACT IN ACCELERATING e-GOVERNMENT
by Dr. Nagwa El- Shenawi
Egyptnagwash@idsc.net.eg
October 2004
““Definitions, Benefits & Business Models”Definitions, Benefits & Business Models”
Presentation Map
I
II
E-Payment Evolution in Arab Region
III
E-Government Benefits
IV Recommendation & Policy Implications for Arab Countries
E-Payment accelerate E-Government
Part II. E-Payment Evolution in Arab Region
1.2 Market Structure
1.3 Global Brand Market Share.
1.4 Performance Indicators (Inter. / Regional).
1.5 Ranking among Arab Countries.
1.6 E-Commerce in Arab Countries.
1.7 Major challenges.
1.1 Basic Concepts
1.1 Basic Concepts
•E-PaymentThe e-payment card is a widely recognized banking instrument for meeting obligations, and it is accepted on the international and local levels, whether by individuals, merchants or banks as a cash-alternative. The card is used to pay against commodities and services provided to the cardholder.
•Credit CardA plastic card that with a coded magnetic stripe that entitles its bearer to a revolving line of credit, whose size and interest rate are determined by the borrower’s income and credit report.
1.1 Basic Concepts (Cont’d)
A bank card with direct access to a card holder’s account, usually a current or savings account. The card acts like a check with the money withdrawn from the existing account balance. The withdrawal of funds is immediate with online debit cards, delayed a day or two with offline debit cards.
•Debit Card
This card is used as a way of financing, but to a limited time period not more than a month (buy now, pay now). The cardholder has to pay his/her debts
totally by the end of the month.
• Charge
cards:
It is a suitable method of accessing current and saving accounts (24 hours a day). The main role of these cards is the easiness of cash withdrawal and other
financial and non- financial transactions. The ability of this card to perform at its optimum depends mainly on the growth of the national, regional and
international ATM networks.
• ATM
cards:
1.2 Arab Region Market Structure
YearYear GDV* $bnGDV* $bnGross Gross
Transaction Transaction (million)(million)
Cards No. Cards No. (million)(million)
MerchantsMerchants P.O.SP.O.S
1998 14 58 4 427225 202445
1999 22 94 5 420592 249585 2000 28 128 6 426274 278390
2001 35 170 8 455019 308367
2002 45 234 10 492333 368291
2003 57 309 12 506500 415064
2004** 72 408 14 521188 467777
Source: Visa International, MasterCard.
*GDV = Gross dollar value. ** estimated
1.2 Egypt Market Structure (2003)-cont’d
ATM MachinesATM Machines 749749
Total No. of CardsTotal No. of Cards 1100 0001100 000
P.O.S.P.O.S. 16117
Credit & Debit Cards(issued abroad) 300 000+
Credit & Debit Cards 750 000
+Internet Cards 50 000
1.3 Global Brand Market Share in Egypt
54%
Visa International
41%MasterCard3%
American Express2%
Dinners Club
Source: Nilson Report, 2003
1.4 Performance Indicators
YearYear
GDV/Transaction($)GDV/Transaction($) GDV/card ($)GDV/card ($)Gross transactions/card Gross transactions/card
No.)No.)
Int.Int. RegionRegion Int.Int. RegionRegion Int.Int. RegionRegion
1998 79 245 2026 3735 25 15
1999 77 236 2120 4516 27 19
2000 76 221 2223 4563 29 21
2001 74 205 2209 4172 30 20
2002 76 194 2318 4568 31 24
Arab Region Vs International level
Source: Computed by Researcher based on Visa & Master’data
1.4 Performance Indicators-cont’d
YearYear
GDV/Transaction($)GDV/Transaction($) GDV/card ($)GDV/card ($) Gross transactions/card No.)Gross transactions/card No.)
RegionRegion EgyptEgypt RegionRegion EgyptEgypt RegionRegion EgyptEgypt
1998 245 226 3735 2722 15 12
1999 236 255 4516 4154 19 16
2000 221 228 4563 3233 21 14
2001 205 175 4172 2281 20 13
2002 194 178 4568 2337 24 13
Egypt Vs Arab Region level
Source: Computed by Researcher based on Visa & Master’data
1.5 Ranking Among Arab Countries
Ranking of Arab Countries by No. of Cards
200 227 255 419
9491205 1313
1638
2444
633625
0500
100015002000
25003000
Qat
ar
Tu
nis
ia
Bah
rain
Leb
ano
n
Eg
yp
t
Om
an
Jord
an
Mo
rocc
o
Ku
wai
t
Un
ited
Ara
b E
mir
ates
Sau
di
Ara
bia
$ million
Source: Visa & MasterCard, 2002
Om
an
Egy
pt
1.5 Ranking Among Arab Countries(Cont’d)
Ranking of Arab Countries by Value of Transaction (Purchases)
2.32.0
1.3
0.60.4 0.3 0.2 0.2 0.1 0.1 0.1
0.00
0.50
1.00
1.50
2.00
2.50
Saud
iA
rabi
a
UA
E
Kuw
ait
Egyp
t
Leba
non
Bahr
ain
Jord
an
Qat
ar
Mor
occo
Om
an
Tuni
sia
bn $
Source: Visa & MasterCard, 2002
1.5 Ranking Among Arab Countries(Cont’d)
Ranking of Arab Countries by Value of Transaction (Cash)
17.59
7.684.91
1.84 1.48 1.18 0.93 0.91 0.74 0.41 0.260.00
5.00
10.00
15.00
20.00
Sau
diA
rabi
a
Kuw
ait
UA
E
Mor
occo
Om
an
Jord
an
Leb
anon
Egy
pt
Qat
ar
Bah
rain
Tun
isia
bn$
Source: Visa & MasterCard, 2002
Ranking of Arab Countries by Volume of Transaction (Purchases)
22880
14429
66564783
2751 2631 2456 1493 1208 1013 809
0
5000
10000
15000
20000
25000
UA
E
Saud
iA
rabi
a
Kuw
ait
Egyp
t
Bahr
ain
Mor
occo
Leba
non
Jord
an
Qata
r
Tuni
sia
Om
an
1.5 Ranking Among Arab Countries(Cont’d)
000
Source: Visa & MasterCard, 2002
Ranking of Arab Countries by Volume of Transaction (Cash)
68725
31204
22293
1404910694
7876 5397 4613 3522 2762.638 1982
0
10000
20000
30000
40000
50000
60000
70000
80000
000
1.5 Ranking Among Arab Countries(Cont’d)
Source: Visa & MasterCard, 2002
Total Population, Total Number of Cards, Cards/1000 people
CountryCountry Total PopulationTotal Population Number of credit cardsNumber of credit cards Cards per 1000 peopleCards per 1000 people
Egypt. 65,200,000 750,000 11.5
UAE. 3,000,000 1,638,235 469
Saudi Arabia. 21,400,000 2,444,214 106
Morocco. 29,200,000 1,205,744 41
Tunisia. 9,700,000 200,599 21
Bahrain. 500,000 207,982 416
Jordan. 5,000,000 949,951 185
Kuwait. 2,000,000 1,313,760 669
Lebanon. 4,400,000 331,140 75
Oman. 2,500,000 625,966 250
Qatar. 960,000 161,932 6
1.5 Ranking Among Arab Countries(Cont’d)
Source: World Development Indicators, Visa & MasterCard 2002
1.6 E-Commerce in Regions
RegionsValue of e-commerce
($)%
United States. 3.2 trillion 46.4%
Asia Pacific. 1.6 trillion 23.2%
Western Europe. 1.5 trillion 21.7%
Latin America. 82 billion 1.2%
Eastern Europe, Africa, Middle East.
68.6 billion 0.9%
Others. 450 billion 6.6%
Source: Forrester Research, Inc., 2004
1.6 E-Commerce in Arab Countries(Cont’d)
E- Commerce in Arab Countries
CountriesCountries No. of internet usersNo. of internet usersAnnual Average Annual Average
spending ($)spending ($)Value of e-Value of e-
Commerce ($)Commerce ($)
Emirates. 976,000 22100 1,078 million
Kuwait. 200,000 18270 182.7 million
Saudi Arabia. 300,000 8460 126.9 million
Egypt. 1,000,000 1530 76,5 million
Lebanon. 300,000 4010 60.15 million
Oman. 120,000 8300 49.8 million
Tunisia. 400,000 2070 41.4 million
Qatar 40,000 20100 40.2 million
Bahrain. 47,000 15100 35.49 million
Morocco. 400,000 1190 23,8 million
Jordan. 212,000 1750 18,55 million
Source: Computed by the researcher based on World Development Indicators data, 2003
1.7 Major Challenges facing EPC
Lack of Legal Framework
Lack of Credit Information
(Credit Bureau)
Lack of Efficient E-Payment Policy and Management
Major Challenges
Inadequate Telecommunication Infrastructure
Part II. E-Government Benefits
2.1 Definition
2.2 Requirements
2.3 Benefits
2.4 Scenarios
2.5 Challenges
2.1 E-Government Definition
Providing public services and transactions in an electronic format (Business –Citizens)
• Issuing ID card
• Issuing Passport
• Issuing or Renewing Driving Licenses
• Issuing birth Certificate
• Utilities
• Tax and Customs Tariffs
• Visa
Digital Signature
Internet Services
E-PaymentMajor
Requirements
Telecommunication Infrastructure
2.2 E-Government Environment
Skilled H/R
2.3 E-Government Advantages
E-government provide benefits for Gov., businesses and citizens from three different axes:
• Cost reduction and efficient processes
• Increasing Performance
• Data Accuracy
• Diminishing administrative procedures
• Best usage of H/R
2.3 E-Government Advantages- cont’d
•Excellent Public Services
• Availability
• Accessibility
• Usability
•Business Growth
•Attract Investment
•Create job opportunities
•Citizen Satisfaction
2.4 E-Government Scenarios
E-government can take more than one scenarios from the following:
• Scenario 1: Telephone and Fax
• Scenario 2: PC and Internet
• Scenario 3: Both
2.5 E-Government Challenges
Applying E-government need to deal with the following challenges:
• Change Management
• Reengineering government Processes
• E-Payment Tools (e-gov card, internet card…)
• Technology Evolution
• Public Private Partnership
• Privacy
• Security
Part III. E-Payment Accelerate E-Government
3.1 E-Payment Impact on E-Government
3.2 Models /Case Studies
1. Efficiency & Effectiveness:
2. Improving Transparency:
3. Decreasing bribery and criminal activities
4. Increasing Revenues & Increasing Liquidity in Banks.
5. Best use of Human Resource.
3.1 E-Payment Impact on E-Government
3.2 Models /Case Studies
Chile’s Case StudyRecognizing the potential benefits of IT, the Chilean Government
established a Communications and Information Technology Unit
(UTIC) in 1998. The UTIC was particularly successful in pushing
forward a comprehensive reform of its procurement system. Chile's
experience with e-procurement has made business opportunities with
the Chilean Government more transparent, reduced firms' transaction
costs, increased opportunities for feedback and cooperation between
firms and public agencies, and sharply reduced opportunities for
corruption.
3.2 Models /Case Studies- Cont’d
Chile’s Case StudyThe efficiency gains of the new system would reach (at a minimum)
$200 million per year, which is equivalent to 1.38% of the central
government's total expenditures; 26.18% of 1997's Public Housing
expenditure; or 11.94 times the total expenditure on employment
programs in 1997. This finding was sufficient to gain the support of
the Budget Office.
3.2 Models /Case Studies- Cont’d
Philippine’s Case StudyIn 1995, the Customs authority in Philippines decided to implement a new IT
based system for payment, clearance processing and shipment release from
Customs control. Diversion of duty and tax payments through the banking
system was a serious problem, as were the number of instances when Customs
collecting officers ran away with their collections. Another major concern was
the unduly long clearance time taken to clear the cargo. The process involved
nearly 10 separate documents in multiple copies, that passed through several
desks being logged into 20 registers. Over 90 steps and more than 40 signatures
and initials were involved. As a consequence, surveys consistently named the
Customs Bureau as one of the most bureaucratic and corrupt government
offices.
3.2 Models /Case Studies- Cont’d
Philippine’s Case StudyIn 1995, the Customs authority in Philippines decided to implement a new IT
based system for payment, clearance processing and shipment release from
Customs control. Diversion of duty and tax payments through the banking
system was a serious problem, as were the number of instances when Customs
collecting officers ran away with their collections. Another major concern was
the unduly long clearance time taken to clear the cargo. The process involved
nearly 10 separate documents in multiple copies, that passed through several
desks being logged into 20 registers. Over 90 steps and more than 40 signatures
and initials were involved. As a consequence, surveys consistently named the
Customs Bureau as one of the most bureaucratic and corrupt government
offices.
3.2 Models /Case Studies- Cont’d
Philippine’s Case StudyImproved service was a major benefit. Quick clearance of a majority of
transactions has brought down the cost of trade significantly. Cargo is
released between four hours to two days, as opposed to eight days in the
earlier system. Under the new system, business people also enjoy the greater
convenience of making payments at familiar banks, instead of lining up for
service at the Customs collection stations
South Korea Case Study
Introduce number of measure to encourage card use, including
mandating acceptance at all businesses with a turnover of more
than $18000 a year and discounts on tax payable by businesses
and individuals that used payment cards. In 1998, when the
programme was launched , the tax take was $46 bn-14% of
GDP. By 2001, the figures has risen to $76 billion and 17% of
GDP.
3.2 Models /Case Studies- Cont’d
Moscow Case Study
The Moscow Social Card demonstrated social impact and economic
benefits. All 2.3 million Moscow residents who receive social benefits-
students, pensioners, members of the armed forces, are being given chip
card. The card currently includes metro ticketing, health and medical
insurance details, as well as giving access to pension payments, government
subsidies and discounts in specified retailers. Moscow is expected to cut the
cost of administering and reduce fraud. It is already seeing success in this
area, with a $30 million reduction in fraud city’s student travel pass and
20% increase in revenue by Moscow Metro.
3.2 Models /Case Studies- cont’d
UK Case StudyUK government is moving all basic purchasing and travel spending to
cards. HM Secretary of the UK Treasury estimates that UK government will
save £300 million over five years using this card. An example of
department’s purchase of six months’ worth of photocopy toner. In the past
this simple transaction might have 50 separate process steps often over 2
hours of direct labor. By contrast, the same transaction with a corporate
purchasing card can drop to less than 30 minutes of total direct labor. It may
be more than 70% less costly all purchase order and payment processes can
be combined into single step.
3.2 Models /Case Studies- cont’d
Dubai Case Study
More than 1000 services are provided electronically through 26
governmental department and organizations in Dubai; i.e. Police
dept., Transport Dept., citizenship dept…etc. The above mentioned
organizations did their best to provide their services through Dubai
Portal on the internet in an efficient manner. The government of
Dubai has succeeded to issue non traditional payment channels or
electronic payment to be used by customers to pay their public
services’ fees through secured way of payment; electronic dirham or
credit card.
3.2 Models /Case Studies- cont’d
Part IV. Recommendations, & Policy Implications
4.1 Policy Implications
4.2 Recommendations
4.1 Policy Implications
1. Setting E-payment Initiative in Arab Countries
2. Activating the Electronic Government Initiative in Arab countries.
3. Increasing the Acceptance / Electronic Delivery Channels .
4. Improving Banking Technology Infrastructure.
5. Developing Appropriate Legal Environment.
6. Increasing Customers Awareness about the Benefit of Using Cards.
7. Increasing the banking Transparency Concerning the Cost and Interest Rate of Credit Cards.
4.2 Recommendations
1. To Central Bank Decision Makers:
a. To support banks in their efforts to increase the usage of credit cards.b. To develop and maintain a database for the usage and the issuance of credit
cards.
2. To Government Decision Makers:
a. To develop the legal environment to support the usage of credit cards.b. To develop the infrastructure required for e-governmentc. To encourage Public Private partnership for providing the adequate technology
solutions.
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