Cross-border Linkage of ATM Networks in East Asia 2008. 4 Jae Hyun - - PowerPoint PPT Presentation

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Cross-border Linkage of ATM Networks in East Asia

Jae Hyun Choi Director General Payment Systems Department (jaehyunc@bok.or.kr)

• 2008. 4

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< I. ATM Network in Korea >

• Interbank ATM Network was established in July 1988 to provide

linkage between domestic bank ATMs

• Operated by KFTC
• A non-profit private organization owned by major Korean banks
• Participants: 26 financial institutions
• Domestic banks, 1 foreign bank, post office, etc.
• Hours of operation: 24 hours & 7 days a week
• Number of CD/ATMs: 51,000 (of which 2,900 accept global cash

cards)

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< I. ATM Network in Korea > - continued

• Services: Cash withdrawals, funds transfers, balance inquiries
• Transaction volume & value: 883 million transactions worth 245

trillion won in 2007

• Accepted card types: MS cards & IC cards
• 160 million cash cards issued
• 25% are IC cards
• 30% are plus/cirrus enabled
• Security measures:
• Hardware Security Module (HSM)
• Message encryption (SEED)

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< II. Key observations >

• Large number of travelers among the countries in East Asia
• 55% of outbound travelers and 51% of inbound travelers
• 540,000 Chinese and Japanese residents in Korea

7.4 M 3.3 M

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< II. Key observations - continued >

• Inconvenience of travelers due to limitations in cash card usage
• verseas
• Only global credit cards or debit cards can be used at limited

number of global ATMs

• Overseas cash withdrawal with credit cards

Cash advance bearing interest

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• Expensive fees paid to the global service providers

Fees paid per withdrawal of 200,000 won (= 209 USD) < II. Key observations - continued >

ATM fee Global network fee Exchange commission

Interest for cash advance Others

Total MC(credit)

• 2.09

1.06 2.88

• 6.03

MC(debit) 2~3 2.09

• 4.09~5.09

BC-CUP(credit)

• 1.04

2.88

• 3.92

CNY Remittance 0~2.37

• 7.52

7.52~9.89 Money Exchange

• 3.59

3.59

($)

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• Potential demand for other services in the future
• Real-time funds transfers

facilitate small value trades & cross-border e-commerce activities

• Development of other services by financial institutions
• Possible connections with other cross-border payment systems
• ASEANPay
• SEPA
• FedACH

< II. Key observations - continued >

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< III. Basic Idea >

• Direct linkage of ATM Networks in Korea, Japan & China
• Withdrawal of local cash with any domestic cards at any ATM in

the three countries

• Net-settlement through designated settlement bank in

designated currency

• Minimal cost
• Connection of existing infrastructure in each country

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• Roles of the relevant institutions
• Central banks
• Reach consensus on standards to be adopted
• Devise measures to manage settlement risk
• Establish sound legal basis (eg. finality of settlement,

FX trades regulation, AML)

• ATM Network operators
• Develop IT system & security measures
• Agree on messaging standards

< III. Basic Idea > - continued

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< IV. Current Progress >

• Initial stage of discussion began among the three central banks
• Bilateral meeting with PBOC
• Bilateral meeting with BOJ
• Tripartite meeting with PBOC and BOJ
• Sharing of information on
• ATM networks in each country
• Issues and challenges identified

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< IV. Current Progress > - continued

• Key issues and challenges
• Difference in card shape
• Possible rise in fraud
• Uncertain Business case
• Not enough data to justify demand
• Cost issues
• Competition issues
• International trends (eg: SEPA, ASEANPay)

May lead to a conclusion that linkage should be pursued on an individual basis rather than on a full scale

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< V. Discussion points >

• What were the key challenges for ASEANPay in both technical

terms and legal terms?

• How did ASEANPay present sufficient business case for the

participating banks?

• In the cases where linkages of ATM networks have already been

established, how do the fees compare to those of systems operated by global service providers? Have they significantly improve convenience for customers?

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End of Presentation

Comments or questions?