E-PAYMENT AND THEIR IMPACT IN ACCELERATING e-GOVERNMENT by Dr. Nagwa El- Shenawi Egypt [email protected] October 2004 “Definitions, Benefits & Business

E-PAYMENT AND THEIR IMPACT IN ACCELERATING e-GOVERNMENT

by Dr. Nagwa El- Shenawi

[email protected]

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 The card acts like a check with the money withdrawn from the existing account balance.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

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1.5 Ranking Among Arab Countries(Cont’d)

Ranking of Arab Countries by Value of Transaction (Purchases)

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Ranking of Arab Countries by Value of Transaction (Cash)

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Ranking of Arab Countries by Volume of Transaction (Purchases)

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Ranking of Arab Countries by Volume of Transaction (Cash)

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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


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.


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.


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.


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.


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.


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.


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.

Documents

E-PAYMENT AND THEIR IMPACT IN ACCELERATING e-GOVERNMENT by Dr. Nagwa El- Shenawi Egypt [email protected] October 2004 “Definitions, Benefits & Business