Guide to Developing a Strategic Framework for …

1 Southern African Development Community (SADC)Payment system ProjectPrepared by the SADC Payment system Project Team under the auspices of the SADC Committee of Central Bank GovernorsApril 2002 Guide to Developing a Strategic Framework forPayment system ModernisationSouthern African Development Community (SADC)Payment system Project_____Prepared by the SADC Payment system Project Team under the auspices of the SADC Committee of Central Bank GovernorsApril 2002 Guide to Developing a Strategic Framework forPayment system ModernisationiSouthern African Development CommunitySADC COMMITTEE OF CENTRAL BANK GOVERNORS. Dr A JaimeBanco Nacional de Angola. Ms L K MohohloBank of Botswana. Mr J Masangu MulongoBanque Centrale du Congo. Mr E M MatekaneCentral Bank of Lesotho. Dr E E NgalandeReserve Bank of Malawi. Mr R Basant Roi Bank of Mauritius. Dr A A MaleianeBanco de Mo ambique.

2 Mr T K AlweendoBank of Namibia. Mr F Chang LengCentral Bank of Seychelles. Mr T T MboweniSouth African Reserve Bank (Chairperson). Mr M G DlaminiCentral Bank of Swaziland. Mr D T S BallaliBank of Tanzania. Dr J MwanzaBank of Zambia. Dr L L TsumbaReserve Bank of ZimbabweISBN: 0-620-28917-1 SADC Committee of Central Bank GovernorsAll rights reserved. Brief excerpts may be reproduced or translated provided the source is of this publication can be ordered from:SADC Payment system Project Teamc/o South African Reserve Box 427 Pretoria0001 SOUTH AFRICAT elephone +27 12 313 3413 Fax +27 12 313 4288E-mail: publication is also available on the SADC Committee of Central Bank Governors World Wide Web site( ).SADC Committee of Central Bank GovernorsiiThis publication, entitled Guide to Developing a Strategic Framework for Payment system Modernisation(theGuide), is published by the SADC Payment system Project Team under the auspices of the SADC Committeeof Central Bank Governors (CCBG).

3 The SADC Payment system Project was launched in June 1996 to: Assist individual SADC countries to define a domestic payment strategy and a development plan. Define a coordinated regional approach to cross-border payments, taking into consideration the implicationsfor trade, central bank policy, foreign exchange positions and the course of the SADC Payment system Project, it became evident that other Developing countriesmight learn from the efforts and experiences of the SADC region. Like many SADC countries, many developingcountries lack the modern communications infrastructure and payment system skills needed to support asuccessful and sustainable modernisation of their domestic payment systems. The Guide , therefore, aims atguiding any initiatives and developments for modernising a country s national payment system (NPS) and atreducing unnecessary trial and error in the CCBG recognises the valuable support given to the SADC Payment system Project by the World Bank andthe Bank for International Settlements (BIS).

4 The World Bank provided financial support through its IDF Grantand other valuable support in terms of payment system consultants. The BIS assisted with consultation and theprinting of our publication entitled Payment Systems in the Southern African Development Community(theGreen Book) in June 1999. The Guide was deliberately written in a general manner to increase its usefulness in different countries. It doesnot represent a blueprint for the modernisation of any individual NPS, but suggests key issues that should beconsidered in the review of an existing payment system or the design of new trust that the Guide will be useful to those undertaking the important issue of payment system MBOWENICHAIRPERSON: SADC COMMITTEE OF CENTRAL BANK GOVERNORSS outhern African Development CommunityForewordFOREWORDiiiSouthern African Development CommunityThe Guide to Developing a Strategic Framework For Payment system Modernisation (the Guide ) wasdeveloped by the SADC Payment system Project Team under the auspices of the SADC Committee of CentralBank Governors (CCBG).

5 The SADC Payment system Project Team, which works full time on SADC paymentsystem issues, collaborates closely with the SADC Payment system Steering Committee, which overseespayment system developments within the SADC of the SADC Payment system Project Team:1. Mr Dave MitchellChairperson: SADC Payment system Steering CommitteeSouth African Reserve Bank (Head: National Payment system Department)2. Mr Graham StokesProject Manager: SADC Payment system ProjectSouth African Reserve Bank ( Senior Payment system specialist)3. Mr Andrew SekhuResearcher and author of the GuideSouth African Reserve Bank (Senior Payment system Analyst)4. Mr Bheki KuneneSouth African Reserve Bank (Senior Payment system Analyst)5. Mr Charles MgudlwaSouth African Reserve Bank (Payment system Analyst)Members of the SADC Payment system Steering Jorge PeresBanco Nacional de Oabile MabusaBank of Luono KimbangaBanque Centrale du Mahlomola MakhupaneCentral Bank of Fanuel KumdanaReserve Bank of Yandraduth GoogoolyeBank of Deolinda GetimaneBanco de Mo Paul HartmannBank of Pierre LaporteCentral Bank of Seychelles10.

6 Mr Johann BenceSouth African Reserve Bank11. Ms Siphiwe DlaminiCentral Bank of Swaziland12. Mr Isaack KilatoBank of Tanzania13. Mr Chisha MwanakatweBank of Zambia14. Ms Alice ZanzaReserve Bank of Zimbabwe Contributions were also made by Ms Ilna Str h and Mr Roy Bamber (who were previous employees of theSouth African Reserve Bank) and Mr Robert Keppler of the World OF CONTENTSCHAPTER 1: INTRODUCTION .. of the to use the Guide .. of the process for NPS perspectives .. structures and skills .. Strategic approach .. approach .. of SADC member states ..4 CHAPTER 2: NPS PERSPECTIVES .. perspective .. perspective .. perspective .. perspective .. perspective .. perspective .. perspective .. Concluding remarks on NPS perspectives ..8 CHAPTER 3: NPS SUPPORT STRUCTURES AND SKILLS .. of different support Payments Council (NPC).

7 Project project project strategy teams or focus groups .. skills .. analysis .. management .. facilitation .. management .. management .. and important support activities .. selection .. 4: PROJECT LAUNCH, SENSITISATION AND STOCKTAKING .. the NPS modernisation project .. the support of commercial banks and other stakeholders .. the support structures .. of NPS stakeholders .. for the sensitisation workshop .. workshop .. stocktaking .. gathering and analysis ..14 Southern African Development CommunityTable of ContentsvSouthern African Development workshop .. report .. of the report by the NPC ..15 CHAPTER 5: VISION AND STRATEGY FORMULATION .. of the vision and strategy formulation phase .. and future characteristics of the new NPS .. success factors .. principles .. of the Vision and Strategic Framework document by the NPC.

8 18 CHAPTER 6: CONCEPTUAL DESIGN .. payment system : deal agreement and payment instruction .. system : payment initiation .. system : clearing .. system : settlement .. system : payment finality .. system : synchronisation of delivery and system : synchronisation of information and payment .. system : deal completion .. design of the envisaged NPS .. all the payment systems in the NPS .. SIPS in the NPS .. the role of the central bank in SIPS and non-SIPS .. example of a real-time gross settlement (RTGS) system .. example of a deferred net settlement system .. example of a hybrid settlement system .. of risk in settlement systems .. infrastructure .. Framework .. considerations for low-value payments .. of cash payments .. versus electronic processing .. payment versus credit payment .. remarks on conceptual design phase .. improvement.

9 And standards .. of change ..31 CHAPTER 7: BUSINESS SPECIFICATIONS .. requirements .. strategy .. payments .. strategy .. management .. trail .. for monetary policy execution .. criteria .. payment system standards .. services .. system availability and reliability .. Cost implications .. Modularity and flexibility .. system operation and oversight .. Compliance requirements document .. a business model of the new system ..35 Table of the conceptual design .. the conceptual design into business processes .. a model of the business process .. of the business model by the strategy team .. principles for Developing a business model .. business model is a communication is critical and repetition is unavoidable .. against self-interest at the expense of national interest ..38 CHAPTER 8: TECHNICAL SPECIFICATIONS .. technical specifications.

10 Architecture .. recovery .. maintenance .. remarks on technical specifications ..41 CHAPTER 9: ACQUISITION, OUTSOURCING AND DEVELOPMENT .. involved in the acquisition process .. the service .. stakeholders .. testing .. acceptance testing ..47 CHAPTER 10: IMPLEMENTATION .. Implementation strategies .. Pilot implementation strategy .. Parallel implementation strategy .. Immediate replacement strategy .. Phased implementation strategy .. Pitfalls in implementing packaged applications software .. Inadequate specification of requirements by end-users .. Inadequate examination of prospective packages .. Need for package Inadequate vendor support .. Potential barriers to the effective implementation of the new system .. Policies and business practices .. Legal Framework .. Environmental Organisational system Implementation scheduling.