Mongolia: Payment System Modernization Project

Sovereign Project | 46312-001

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
  • Country/Economy
    Mongolia
  • Modality
    • Loan
  • Sector
    • Finance
Project Name Payment System Modernization Project
Project Number 46312-001
Country / Economy 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
Description

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 This includes a General Ledger system that is now outdated and needs to be integrated with participating banks statutory accounts with BOM.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 The loan was extended to 31 December 2022. The National T card systems enhanced to support EMV and NFC technology and integration of e-Money schemes into Banking Payment system. BOM has selected Ubivelox LLC of Korea as its contractor for the package and signed contract on 28 August 2020. By 31 Dec 2020, BOM and the vendor completed phase 1 and 2 of the contract. The progress of contract implementation for the reporting period: first batch 500,000 pieces of cards was delivered to BOM in July 2021 BOM worked with all acquiring member banks and guided them to strengthen technical readiness for integration to new T-cards. BOM distributed cards to commercial banks. In Jan 2022, 140,000 cards of second batch was delivered to Ulaanbaatar. The remaining 360,000 cards are expected for delivery in Feb 2022. Renovation of and supply and installation of equipment for the Main Data Center in Ulaanbaatar. The contract was signed on 12 September 2019 with Arvis Systems LLC. The Contractor has completed the installation of equipment at the new NETC Building as planned before 30 September 2020. The design documents of Main Data Center were submitted to Uptime Institute on 4 December 2020 for review and to ensure that each subsystem among electrical, mechanical, monitoring, and automation meet the fundamental concepts and to confirm whether there are any weak links in the chain. Due to COVID situations, at the contractor's request, EA has extended the contract till 30 December 2021 for the Uptime Institute certification service. The contract for supply and installation of IT equipment and device for National Electronic Transactions Center (NETC) was awarded on 29 June 2020. For the reporting period, under Lot 1 NETC building security (IT Zone LLC), the final acceptance and testing was completed on 2 March 2021. The contract is completed. Under Lot 2 - Office systems (Summit Computer Technology LLC): all devices and equipment have been delivered. As of 31 Dec 2021 the contractor has complete all remaining installation works; Under Lot 3 - Back up Electric Supply (Wagner Asia Equipment LLC): the configuration and testing was completed in January 2021. The final acceptance test was completed on 10 Feb 2021. The contract is completed.The package for implementation of Mobile NFC enablement (either HCE or TSM) and Tokenization Service was re-advertised several times, in May, September 2020 and in February 2021. The contract between the BOM and the Consortium of Tridum e-Security & HPS was signed on 8 November 2021. Servers are delivered at Mongolian custom and tax redemption documents are under preparation. BOM has selected Compass Plus (United Kingdom) for implementation of Card Management System, the contract was awarded on 29 June 2020. All participants were connected to the testing and production environment and completed the user acceptance test (UAT). All customization was provided by vendor. The production environment was set-up and testing is completed. The system settlement, liquidity management, acceptance, stress test with the participant, and system stress test are completed. BOM's NETC Card management system has been successfully launched in April 2021. Since the launch, the system has been operating as well, BOM and the Contractor was jointly monitoring post go-live operation. the contract is completed. The contracts for supply and installation of Security Operation Center's Systems was awarded 18 December 2020, for Lot 1 and Lot 2: to IT Zone LLC and for Lot 3 to Mobinet LLC. User acceptance tests have been competed by BOM and the contractor. The first user of the system, NETC of BOM, has launched the SOC system in a production environment in December 2021.The contract for supply of Remote Working Environment Devices was awarded by BOM to JV Mobinet LLC and Vertexmon.
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 new upgraded RTGS Second generation system was launched in January 2018. The relevant contract has been successfully closed" BOM has been implementing its Core Banking System since June 2019 with contractor, Intellect Design Arena Limited, India. The project is carried out as planned." BOM has started implementation of Mongolian Unified CSD system with contractor, CMA Small Systems AB (Sweden). The project is carried out as planned. " The contracts for Supply and Installation of Security Operation Center at NETC system were awarded in December 2020. The contract activities are completed and final payments were processed in Jan 2022. The contract BOM Big Data package was awarded on 6 Dec 2021. The equipment was delivered to BOM on 12 Jan 2022." The project successfully completed provision of core network security devices and security network upgrade to NETC in 2017." The project successfully completed extension of NETC inter-bank core network in 2017." BOM NETC remote Data center renovation has been completed in 2019. " BOM has started the implementation of NETC Main Data center renovation project in Sep 2019 and ongoing as planned. BOM extended the contract until 31 December 2021.- Public Key Infrastructure (PKI) implementation has been completed in NETC infrastructure in 2018.- NETC Fiber Network Extension - successfully completed in Q4 2017 and became operational.- The new ACH+ system was launched on 15 August 2019. The relevant contract has been successfully closed.- NETC card management bidding has been announced in March 2020 a through direct contracting. BOM has awarded a contract to Compass Plus company of UK in July 2020. The vendor has conducted a technical and functional training to NETC staffs and provided HWs. NETC Card management system launched in April 2021. The final payment was made to the contractor on 5 Jan 2022. The contract activities completed. - The contract for supply of national T card systems was awarded to Ubivelox LLC of Korea, and project is ongoing. The contractor shipped 500,000 card in 2021 and 140,000 cards in Jan 2022, and remaining 360,000 cards will delivered by Feb 2022. - The contract for supply and installation of IT equipment and device for National Electronic Transactions Center (NETC) was awarded on 29 June 2020. The vendor completed supply and installations of of devices. The contract is completed. - The procurement package for implementation of Mobile NFC enablement (either HCE or TSM) and Tokenization Service was re-advertised two times, in May, September 2020 and in February 2021. The contract between the BOM and the Consortium of Tridum e-Security & HPS was signed on 8 November 2021. Servers are delivered at Mongolian custom and tax redemption documents are under preparation.- The bid for Remote Working Environment Devices was announced in April 2021, bid evaluation completed in June 2021. The BOM awarded the contract to JV Mobinet LLC and Vertexmon LLC on 8 July 2021. Installation and configuration of Poly video system at 8th floor is ongoing. The documentation for final acceptance of all devices delivered is under preparation.Being implemented. The project supported the capacity building activities, public awareness raising events, study tours and various training for BOM staff on payment system, IT systems.Draft National Payment System law has been approved by the Mongolian parliament in May 2017. New ACH rules and regulation are in place.
Geographical Location Nation-wide
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects Not applicable for this project.
Involuntary Resettlement Not applicable for this project.
Indigenous Peoples Not applicable for this project.
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 latest review mission was executed on 22-29 June 2020. In particular, the midterm review mission was executed on 26 February-2 March 2018.
Responsible ADB Officer Enkhbold, Enerelt
Responsible ADB Department East Asia Department
Responsible ADB Division Mongolia Resident Mission
Executing Agencies
Bank of Mongolia (Central Bank)
Mr. J. Unenbat
Commerce Street 6
Ulaanbaatar - 11
Mongolia
Timetable
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 25 Jan 2022

Loan 3072-MON

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
26 Nov 2013 14 Mar 2014 14 Aug 2015 30 Jun 2017 31 Dec 2022 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 22.50 Cumulative Contract Awards
ADB 20.00 22 Feb 2022 19.30 0.00 96%
Counterpart 2.50 Cumulative Disbursements
Cofinancing 0.00 22 Feb 2022 14.51 0.00 73%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - Satisfactory Satisfactory Satisfactory - Satisfactory

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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The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.


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.


Related Publications

None currently available.


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

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Tenders

Tender Title Type Status Posting Date Deadline
Central Securities Depository & Trading Systems project consultant Individual - Consulting Closed 25 Apr 2022 09 May 2022
3072 MON: Payment System Modernization Project (IB/Goods/2021-040 Big Data) Invitation for Bids Closed 19 Jul 2021 30 Aug 2021
Consultancy Services on Public Communication Team Firm - Consulting Closed 07 Dec 2020 05 Jan 2021
3072-MON: Payment System Modernization Project [NETC/Goods/2020-032] Invitation for Bids Closed 10 Sep 2020 09 Nov 2020
3072-MON: Payment System Modernization Project Invitation for Bids Closed 06 May 2020 17 Jun 2020
Payment Systems Policy Advisor Individual - Consulting Closed 25 Apr 2020 18 May 2020
Payment Systems IT Implementation Consultant Individual - Consulting Closed 25 Apr 2020 08 May 2020
3072-MON: Payment System Modernization Project [NETC/Goods/2018-004] Invitation for Bids Closed 04 Oct 2019 15 Nov 2019
Loan 3072-MON: Payment System Modernization Project [IB/Goods/2018-002] Invitation for Bids Closed 06 Sep 2019 04 Nov 2019
Specialist on IMPLEMENTATION OF MOBILE NFC ENABLEMENT (EITHER HCE OR TSM) AND TOKENIZATION SERVICE Individual - Consulting Closed 13 Nov 2018 02 Dec 2018
Loan No. 3072-MON: Payment System Modernization Project [IB/Goods/2017-001] Invitation for Bids Closed 07 Nov 2018 19 Dec 2018
EMV/NFC contract management specialist Individual - Consulting Closed 03 Oct 2018 21 Oct 2018
Specialist on Central Securities Depository and Trading systems Individual - Consulting Closed 14 Sep 2018 04 Oct 2018
Payment Systems Specialist Individual - Consulting Closed 03 Jul 2018 22 Jul 2018
Payment Systems Advisor Individual - Consulting Closed 03 Jul 2018 22 Jul 2018
SPECIALIST ON CENTRAL SECURITIES DEPOSITORY AND TRADING SYSTEMS Individual - Consulting Closed 28 Feb 2018 13 Mar 2018
Loan 3072-MON: Payment System Modernization Project [IB/Goods/2017-001] Invitation for Bids Closed 17 Jan 2018 22 Mar 2018
L3072-MON: Payment System Modernization Project [NETC/Goods/2017-015] Invitation for Bids Closed 20 Sep 2017 01 Nov 2017
Loan3072-MON: Payment System Modernization Project [NETC/Goods/2017-003] Invitation for Bids Closed 18 Sep 2017 30 Oct 2017
THE NATIONAL T-CARD SCHEME ENHANCED TO SUPPORT EMV AND NFC TECHNOLOGY Individual - Consulting Closed 11 Sep 2017 24 Sep 2017
SPECIALIST ON CENTRAL SECURITIES DEPOSITORY AND TRADING SYSTEMS Individual - Consulting Closed 31 Aug 2017 13 Sep 2017
DESIGNING AND SUPERVISING RENOVATION DESIGN AND TECHNICAL REQUIREMENT FOR DATA CENTERS IN REMOTE SITE AND ULAANBAATAR Firm - Consulting Closed 09 Aug 2017 13 Sep 2017

Contracts Awarded

Contract Title Approval Number Contract Date Contractor | Address Executing Agency Total Contract Amount (US$) Contract Amount Financed by ADB (US$)
No.25: Implementation Mobile NFC enablement (either HCE and TSM) and Tokenization Service Loan 3072 11 Nov 2021 Consortium of Tridum e_security LLC and Hightech Payment System Singapore Pte. Ltd | Mongolia Bank of Mongolia (Central Bank) 2,285,070.50 2,285,070.50
Public Communication Team Loan 3072 13 Sep 2021 Concept International LLC | Chingeltei District 2 khoroo Choimbol 55 Ulaanbaatar Mongolia Bank of Mongolia (Central Bank) 110,161.60 110,146.12
CSD, MONEY MARKET AND FX TRADING SYSTEMS Loan 3072 02 Jan 2020 CMA SMALL SYSTEMS AB | SWEDEN SWEDEN Bank of Mongolia (Central Bank) 2,493,327.27 2,238,963.00
RENOVATION, SUPPLY AND INSTALLATION OF EQUIPMENT FOR THE MAIN DATA CENTER IN ULAANBAATAR Loan 3072 16 Sep 2019 ARVIS SYSTEMS LLC | SBD 7 KHOROO, 11 KHOROOLOL,ERHUUGEIN STR 33, ORIENT CENTER, ULAANBAATAR MONGOLIA Bank of Mongolia (Central Bank) 1,258,536.46 1,097,673.66
SUPPLY AND INSTALLATION OF CORE BANKING AND GENERA L LEDGER SYSTEM (CBS/GL). Loan 3072 06 Jun 2019 INTELLECT DESIGN ARENA | 244,ANNA SALAI CHENNAI-600006 PHONE: 91-44-39874000 INDIA Bank of Mongolia (Central Bank) 3,552,068.00 3,552,068.00
ACH PLUS SUPPORTING DIRECT CREDITS, DIRECT DEBITS AND INSTANT FUNDS TRANSFERS (NETC/GOODS/2017-003) Loan 3072 27 Apr 2018 MONTRAN CORPORATION,USA SUBCONTRACTOR SUMMIT | 295 MADISON AVENUE FLOOR 42, NEW YORK NEW YORK 10017, USA UNITED STATES Bank of Mongolia (Central Bank) 1,378,750.00 1,240,909.00
PUBLIC KEY INFRASTRUCTURE IMPLEMENTATION FOR FINAN CIAL ORGANIZATIONS IN MONGOLIA, INCLUDING O&M SUPP ORT FOR 36 MONTHS Loan 3072 02 Mar 2018 JV OF TRIDIUM E-SECURITY LLC AND PRIMEKEY SOL | BAYANGOL DISTRICT,D BLOCK BUILDING 17/2 KHOROO 3,ZAMCHDYN ST,ULAANBAATAR MONGOLIA Bank of Mongolia (Central Bank) 1,295,800.00 1,295,800.00
The Supply of NETC Core Network Devices (Routers, Switches, Next Generation Firewalls) Loan 3072 30 Mar 2017 Unitelcom LLC | 6Th Floor,Building7/3,Olympic St 1St Khoroo, Sukhbaatar District Mongolia Bank of Mongolia (Central Bank) 441,905.54 382,602.20
CA5/S303 Loan 3072 30 Mar 2017 It Zone LLC | Suite403,4Th Floor,City Tower Chingis Square-2, Sukhbaatar District Mongolia Bank of Mongolia (Central Bank) 682,365.50 682,365.50

Procurement Plan