“Retail payment costs”
Demand Side- Albanian case.
Torino, 22 Sept 2016
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ALBANIAN PAYMENT SERVICES ARCHITECTURE:
BoA
Banks
Non-Banks Financial
institutions
•
RTGS
ACH
CSD
16 Banks
~500 branches
•
•
•
Torino, 22 Sept 2016
Payment institutionsPost Office and Pay &Go
MTO-Western Union, MoneyGram
E- money institutions -M-Pesa and
Easy Pay.
Mobile Payment initiator- Mpay
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RECENT POSITIVE TRENDS ON ELECTRONIC PAYMENTS:
Torino, 22 Sept 2016
3
RETAIL PAYMENTS COST STUDY
IMPLEMENTATION IN ALBANIA – DEMAND SIDE
MOTIVATION AND METHODOLOGY
Torino, 22 Sept 2016
4
MOTIVATION
• Promotion of cost efficient retail payment instruments:
– Measure for the first time the cost of payment instruments
in Albania
– Identify the most appropriate saving method/scenario
regarding the efficiency of payment instruments usage.
– Create a database on costs that can serve.
 for comparison purposes if/when the study is
implemented again in the future;
 as a measurable indicator to track the efficiency of the
reforms.
– Serve as a base for regional expansion of the study.
Torino, 22 Sept 2016
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SHORT INFO ON METHODOLOGY
• The demand side
- Payment service users(PSU) :
Consumers, Businesses and Government agencies;
• The Supply side
– Payment service providers (PSP) and payment
infrastructures.
Torino, 22 Sept 2016
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THE SCOPE OF THE METHODOLOGY INCLUDES*:
Stakeholders PSU
Payment Instruments
Payment Transmission Methods
Payment Purposes
Payment Types
Torino, 22 Sept 2016
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SURVEY
Questionnaires provided by WB PSDG
Customized by BoA
Stratified sample design (nationally representative)
Manuals for interviewers by BoA and INSTAT
Conducted by INSTAT
Data analyzed by WB PSDG*
*based on the WB PSDG methodology and findings
Torino, 22 Sept 2016
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•Sample
distribution:
household,
gender, age,
education,
occupation status,
income level
•30min/1surv.
•4 weeks
interview
• 462 responds
(716 sample)
• 105,642
sampling frame
by: geography,
activity, size
• 40min/1
• 6 weeks
interview
Torino, 22 Sept 2016
GOVERNMENT
•897
responds
BUSINESS
CONSUMER
DEMAND STAKEHOLDERS-GROUP (PSU)
• Central gov /agn;
• Local gov/instit;
• Public utility Co;
• Social security
agencies
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PMT PURPOSE for each PMT TYPE
Payee
Consumer (P)
Business (B)
Government Agency (G)
Payer
P2P
Consumer (P)



PMT:
remittances
for goods and/or
services sold
Withdrawals/Deposit




B2P
•

Payments of salaries



Business (B)
PMT:
for retail goods, services
for regular transport
for utilities, periodic bills
for consumer
durables
Government
Agency (G)
PMT:
 of taxes, fines, fees, and
other government
obligations
B2B
B2G
for procurement of consumable and
PMT:
capital goods, of supply chain products 
of taxes, fines, fees,
and professional services
and other government
for regular transport, for utilities
obligations
Deposits of cash receipts and cheques
Supply of change, and transfer of funds
between own accounts
G2P
PMT:

of salaries, pensions,
social assistance
 Payments of tax
refunds
P2G
P2B
G2B

PMT
 of corporate tax refunds


Turin, 22 Sept 2016
G2G
Deposits of cash
receipts and cheques
Supply of change, and
transfer of funds
between own accounts
PMT to other
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government agencies
PAYMENT INSTRUMENTS INCLUDED IN THE STUDY
• By Methodology:
Paper–Based:
- Cash
- Paper Credit Transfer
- Cheque
Electronic instrument:
- Debit/Credit Cards
- Transfer Direct Credit
-Transfer Direct Debit
- Online Money (i.e.
PayPal, mobile)
Torino, 22 Sept 2016
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DISTRIBUTION OF PMT FOR CONSUMERS BY:
Torino, 22 Sept 2016
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DISTRIBUTION OF PMT FOR BUSNESESS BY INSTRUMENT*
Torino, 22 Sept 2016
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CLASSIFICATIONS OF COSTS
PURPOSE is:
*
Accurate collection of
comprehensive
• Direct costs
• Indirect costs
Estimation of potential
savings when
substituting payment
instruments
• Fixed costs
• Variable
Correct calculation of the
total costs per stakeholder
and total costs for the
economy
Torino, 22 Sept 2016
• Resource costs
• Transferred costs
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TOTAL ANNUAL COSTS FOR CONSUMERS BY PAYMENT
INSTRUMENT*
Time-Based
Costs (travel
time + waiting
time +
transaction
time)
Transportation
Costs
Internet Costs
Transaction
Fees
ATM
Withdrawal
Fees
Bank Account
Maintenance
Fees
Card
Maintenance
Fees
Losses/Theft
Other Costs
Total Costs
Cash
Paper-Based
Credit Transfer
Debit Card
Credit Card
Electronic
Credit Transfer
Online Money
USD 63.3 million
USD 1.6 million
USD 0.04 million
USD 0.03 million
USD 0.06 million
USD 0.007 million
---
---
---
---
---
---
---
USD 0.008
million
USD 0.01 million
USD 0.04 million
USD 0.006 million
---
USD 8 million
---
---
---
---
USD 1.9 million
---
---
---
---
---
USD 9.5 million
USD 9.5 million
USD 9.5 million
---
USD 9.5 million
---
---
---
USD 2.8 million
USD 1.25 million
---
---
USD 1.2 million
---
---
---
---
---
---
---
USD 1 million
USD 0.4 million
USD 0.15 million
USD 68.8 million
USD 18.4
million
USD 9.3 million
USD 0.2 million
USD 3.75 million
USD 13.2
million
Torino, 22 Sept 2016
USD 1.2 million
USD 2.5 million
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Demand Side Outcomes*
Average cost per
-payment type, use case,
and
- pmt instrument
combination,
given a transmission
method.
Total costs borne by each
user, for a given payment
instrument.
Turin, 22 Sept 2016
Ratio of paper-based to
electronic payments
(annual, based on
volume).
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TOTAL COST CALCULATIONS FOR CONSUMERS*
Total annual costs for consumers by payment instrument/GDP
Torino, 22 Sept 2016
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TOTAL COST CALCULATIONS FOR BUSINESSES*
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GOVERNMENT AGENCIES*
Annual cost of government payments by payment instrument in % GDP
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AGGREGATE DEMAND-SIDE COST*
Consumers
Businesses
Government
Agency
Resource Costs
(RC)
0.64% of GDP
0.4% of GDP
0.017% of GDP
Transfer Costs
(TC)
0.36% of GDP
0.2% of GDP
---
Total Costs per
Stakeholder
1% of GDP
0.6% of GDP
0.017% of GDP
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SAVING SCENARIOS*
Figure 1: Savings from different substitution scenarios (highest to lowest) at three different conversion rates
Savings (as % of 2014 GDP) at 35%
Conversion Rate
CASH-->ELECTRONIC
CREDIT TRANSFER
0.07%
Savings (as % of 2014 GDP)
at 70% Conversion Rate
CASH->ELECTRONIC
CREDIT TRANSFER
0.14%
Savings (as % of 2014) at
100% Conversion Rate
CASH->ELECTRONIC
CREDIT…
0.20%
CASH-->ONLINE
MONEY
0.17%
CASH-->ONLINE MONEY
0.06%
CASH-->ONLINE
MONEY
CASH-->CREDIT CARD
0.05%
CASH-->CREDIT
CARD
0.10%
CASH-->CREDIT
CARD
0.16%
0.05%
CASH-->DEBIT
CARD
0.10%
CASH-->DEBIT
CARD
0.15%
0.05%
PAPER-BASED
CREDIT
TRANSFER--…
0.10%
PAPER-BASED
CREDIT
TRANSFER--…
0.15%
0.04%
PAPER-BASED
CREDIT
TRANSFER--…
0.08%
PAPER-BASED
CREDIT
TRANSFER--…
0.15%
CASH-->DEBIT CARD
PAPER-BASED CREDIT
TRANSFER->ELECTRONIC CREDIT …
PAPER-BASED CREDIT
TRANSFER-->ONLINE
MONEY
0.12%
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SAVING SCENARIOS
Saving Scenarios switching from the most costly to most efficient instrument
Consumers
Businesses
Turin, 22 Sept 2016
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NEXT PHASE Complete Study
Supply Side
Total Economy
• Total annual costs
associated with each
payment instrument.
• Average cost per payment
processed, by payment
instrument and
transmission method.
• Total annual costs for
payment service and
payment infrastructure
providers.
• Total resource costs and
total transfer costs.
• Total annual costs to the
economy associated with
each payment instrument,
in absolute terms, and in
GDP terms.
• Savings that could occur
from different substitution
scenarios.
Turin, 22 Sept 2016
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Thank You!!!
Turin, 22 Sept 2016
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CONSUMER SAMPLE DISTRIBUTION BY :
Role of Respondent in the Household
14%
Age Category
9%
20%
22%
Responsible for finances
23%
11%
Household head
30-39
40-49
Responsible for finances
and household head
43%
18-29
21%
Other
65 and above
37%
Gender
50-64
Education Level
7%
1%
2%
None
13%
Elementary school
34%
37%
Female
8%
Male
High school
Vocational school
University
63%
35%
Post university
Other
Turin, 22 Sept 2016
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CONCLUSIONS
EXPECTED BENEFITS FROM THE STUDY
The final conclusions of the study is going to support: the process of )
– Familiarizing the demand side with the costs that each actor bears.
– Creating an institutional and inter-institutional strategy in the area of
retail payments with focus on:
• Regulatory intervention and self-regulatory measure for payments
market.
• Initiation of projects on enhancing efficiency and safty of payment
instrument- interbank Direct Debit, Standardization of Payment OrderSTP
• A proactive role as catalyst through:
 Promoting the private initiative in the area of payments system;
 Supporting and promoting cost efficient payment instruments;
 Understanding and handling the needs of unbanked population.
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