Cross-border Linkage of ATM Networks in East Asia 2008. 4 Jae Hyun Choi Director General Payment Systems Department (jaehyunc@bok.or.kr) 1
< 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) 2
< 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) � 3
< II. Key observations > Large number of travelers among the countries in East Asia � 3.3 M 7.4 M 55% of outbound travelers and 51% of inbound travelers � 540,000 Chinese and Japanese residents in Korea � 4
< II. Key observations - continued > Inconvenience of travelers due to limitations in cash card usage � overseas 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 5
< II. Key observations - continued > Expensive fees paid to the global service providers � Fees paid per withdrawal of 200,000 won (= 209 USD) ($) Global Exchange Interest for ATM fee cash advance Others Total network fee commission 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 6
< II. Key observations - continued > 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 � 7
< 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 � 8
< III. Basic Idea > - continued 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 • 9
< 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 � 10
< 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 11
< 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? 12
End of Presentation Comments or questions? 13
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