Mongolia: Payment System Modernization Project

Sovereign (Public) Project | 46312-001 Status: Active

ADB is helping Mongolia modernize its payment system. The project will help improve the interbank payment system that supports the clearing and settlement of all interbank and payment service provider transactions. It will upgrade the retail payments infrastructure and support systems, and help establish the necessary legal and regulatory framework.

Project Details

Project Officer
Enkhbold, Enerelt East Asia Department Request for information
  • Mongolia
  • Finance
Project Name Payment System Modernization Project
Project Number 46312-001
Country Mongolia
Project Status Active
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3072-MON: Payment System
Ordinary capital resources US$ 20.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector

Finance - Banking systems and nonbank financial institutions

Gender Equity and Mainstreaming No gender elements

The current payments system is composed of an interbank payment infrastructure and a retail payment infrastructure. The former covers the real time gross settlement system (RTGS) for high-value transactions and the low-value payments system (LVPS) for low value transactions. It also covers the auctioning and trading of foreign exchange and securities, although the present system does not cover collateral management nor the pledging of securities/bonds. This includes a General Ledger system that is now outdated and needs to be integrated with participating banks statutory accounts with BOM. The retail payment infrastructure is based on the Electronic Transfer System (ETS) system acquired by BOM and covers electronic fund transport at point of sale / automatic teller machine (EFTPOS/ATM) switching but it can also support card and merchant management and EMV (Europay, Mastercard and Visa) and hybrid cards. To be able to accommodate these however, the ETS needs to be upgraded.

The current system was built with support from the World Bank under its Financial Capacity Development Project completed in 2009 and considered one of its successful interventions under the project. However, it was recognized even at the close of the project that the payments system needs to undergo further development as market requirements evolve and due to technical limitations of the system as well as to address policy issues that emerge. The issues that need to be addressed include:

(i) ability of the current software to accept future expansion of services and reliance of the current system on the current application provider for upgrade and maintenance;

(ii) design of an open, flexible, modular architecture that can accommodate the introduction of new electronic payment services, as well as money and capital market instruments that suit evolving market needs and provide transparency, reduction of cash circulation in a modern broadband connected environment;

(iii) development of an Eco System which ensures interoperability and competitiveness between service providers that may be implemented by competing institutions to avoid fragmented services and avail of scale economies;

(iv) develop local standards and authentication procedures that more appropriately meet local requirements aligned with prescribed international standards;

(v) set-up business continuity and disaster management plan to address system vulnerabilities such as network and system failure (computer crashes) and computer hacking, among others; and not the least; and

(vi) establish an appropriate legal/regulatory framework that provides for the use of digital signatures, conduct of electronic payments, etc. and required authorities for oversight and supervision, market discipline and transparent rules.

A Payments Law is currently under consideration. More importantly, the current system's processing cost has been calculated to reach about 20 times that of the Republic of Korea's on a per transaction basis and has been increasing at the rate of 10% per year.

Project Rationale and Linkage to Country/Regional Strategy
Impact Modern payment services are available throughout Mongolia and easily accessible even by citizens who live in distant rural areas or abroad or are not clients of a bank.
Project Outcome
Description of Outcome National full-service payments system established that is efficient and affordable by poor individual
Progress Toward Outcome

Interbank low value payments and payment card transactions are increasing and further increases are expected once Automated Clearing House system and the card switch system are introduced.

The Bank of Mongolia is planning to introduce an innovative and interoperable mobile payments system in 2019.

Draft National Payment System law has been approved by the Mongolian Parliament in May 2017.

The number of payment terminals has increased along with project expectations.

A number of important procurements are being prepared which will facilitate continued progress following the updated procurement plan. The BOM will recruit the international ACH consultant in Q4 2017.

Implementation Progress
Description of Project Outputs

Interbank payment systems infrastructure strengthened

The retail payment systems infrastructure and support systems upgraded

External services and technical support provided

Legal and regulatory framework established

Status of Implementation Progress (Outputs, Activities, and Issues) The specialist for the core banking system has been recruited and the recruitment of a specialist on Central Securities Depository will soon be completed. The contract for the procurement of core network devices and fiber network extension has been awarded. The Real Time Gross Settlement (RTGS) bid award is in its advanced stages. The bidding documents for Public Key Infrastructure implementation for financial organizations and Automated Clearing House are being prepared.
Geographical Location
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects NA
Involuntary Resettlement NA
Indigenous Peoples NA
Stakeholder Communication, Participation, and Consultation
During Project Design The Bank of Mongolia and the National Payments Center were consulted regularly over project design.
During Project Implementation Regular communication occurs between ADB and the executing and implementing agencies. The first loan review mission was carried out on 10-14 April 2017. The next review mission is planned to be executed in November 2017.
Responsible ADB Officer Enkhbold, Enerelt
Responsible ADB Department East Asia Department
Responsible ADB Division Mongolia Resident Mission
Executing Agencies
Bank of Mongolia (Central Bank)
Commerce Street 6
Ulaanbaatar - 11
Concept Clearance 21 Dec 2012
Fact Finding 25 Oct 2012 to 26 Oct 2012
MRM 20 Dec 2012
Approval 26 Nov 2013
Last Review Mission -
Last PDS Update 11 Sep 2017

Loan 3072-MON

Approval Signing Date Effectivity Date Closing
Original Revised Actual
26 Nov 2013 14 Mar 2014 14 Aug 2015 30 Jun 2017 31 Dec 2019 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 22.50 Cumulative Contract Awards
ADB 20.00 26 Nov 2013 1.35 0.00 7%
Counterpart 2.50 Cumulative Disbursements
Cofinancing 0.00 26 Nov 2013 1.42 0.00 7%

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

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Evaluation Documents See also: Independent Evaluation

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Related Publications

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