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 Name||Payment System Modernization Project|
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|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 This includes a General Ledger system that is now outdated and needs to be integrated with participating banks statutory accounts with BOM.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.|
|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.
|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.|
|Summary of Environmental and Social Aspects|
|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|
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|
|Approval||Signing Date||Effectivity Date||Closing|
|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%|
|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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|Title||Document Type||Document Date|
|Payment System Modernization Project: Procurement Plan||Procurement Plans||Jun 2017|
|Payment System Modernization Project: Project Administration Manual||Project/Program Administration Manual||Oct 2016|
|Төлбөр тооцооны системийг шинэчлэх төсөл : Төслийн МэдээллийнТайлан||Translated PDS||Mar 2014|
|Project Agreement for Payment System Modernization Project||Project/Program Agreements||Mar 2014|
|Loan Agreement for Payment System Modernization Project||Loan Agreement (Ordinary Resources)||Mar 2014|
|Payment System Modernization Project||Reports and Recommendations of the President||Nov 2013|
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.
None currently available.
Evaluation Documents See also: Independent Evaluation
None currently available.
None currently available.
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