PAYMENT AND SETTLEMENT SYSTEM
The year 1997 was fundamental for designing the future of the
Estonian payment and settlement system. Eesti Pank decided to
design a new Inter-Bank Payment System (IBPS) complying with the
EU requirements based on two sub-systems: a Real Time Gross
Settlement System (RTGS) for processing high value and urgent
inter-bank payments and a Designated Time Net Settlement System
(DNS) for processing retail payments. The objective of the
new payment and settlement system is to accelerate settlement and
build confidence to enhance financial intermediation in
Estonia's banking sector and reduce the significance of cash in
high value transactions. The cost per payment decreases for
credit institutions as well. Implementation of two parallel
systems provides an element of choice to the final consumer:
designated net settlement is cheaper for retail payments. Two
physically separate systems create also the opportunity for each
system to provide mutual disaster contingency capability.
In order to design and implement the new payment and
settlement system Terms of Reference were prepared and a
competitive tendering exercise was conducted together with the
European Union Phare programme to find a suitable contractor to
undertake the detailed design of the system. The winner started
designing of the payment and settlement system in January 1998. According
to the Terms of Reference the Designated Time Net Settlement
System should be launched in September 1999 and the Real Time
Gross Settlement System in September 2000.
The current inter-bank payment and settlement system as
described in the Annual Report of Eesti Pank for 1996 has not
changed and neither will prior to the introduction of the
Designated Time Net Settlement System. Nevertheless the
development of the financial sector and better management of
settlement risks necessitate the continuous upgrading of the
current payment and settlement system. In 1997, the main change
introduced for reducing financial risks consisted in measures
aimed at increasing the liquidity buffers (see Monetary
Policy, Operational Framework of Monetary Policy).
Technical solutions of payment and settlement systems were
continuously aligned. Unified account statement requirements for
credit institutions were introduced, this statement being the
only document confirming the crediting of beneficiaries'
account. The practice of sending payment order copies on paper
was replaced by electronic copy. The introduction of an
all-Estonian standard for the unified account number continued,
the process will be completed in 1998.
SETTLING OF PAYMENTS
About one third of inter-bank payments are settled through
Eesti Pank. The rest are either intra-bank payments or
payments settled any other way. Although the amount of
settlements through Eesti Pank increased by 24% in 1997, the
growth rate of payments has decreased from year to year (see Table 6.1). The majority of payments
settled is under EEK 50,000. The volume of payments settled
through Eesti Pank increased by 53% in 1997. The growth rate
of turnover has increased over the years.
PAYMENT INSTRUMENTS
Cash
According to estimates cash payments comprise about
80% of all the transactions. 2.5% of payments settled
through the credit institutions had been initiated in
cash in 1997.
Non-cash Payment
Instruments
The most extensively used payment instrument is
continuously a credit order comprising about 90%
of the total non-cash settlements and 95% of their
turnover. The customary paper-based credit order is ever
more replaced by various telebanking products.
Although Estonian credit institutions have been offering
these products for several years, they were accessible
mostly to companies due to the high prices. Telephone and
Internet banking services as well as payments through
ATMs (Automated Teller Machines) marketed in 1997 made
telebanking products available to private individuals as
well.
As to debit instruments, both cheques and direct debits are equally in use. Although payment cheques
have never played an important role in the Estonian
market of payment instruments, their number has remained
stable over the years. The share of direct debits has
increased and is comparable to the cheques, marking,
thus, a breakthrough for this payment instrument.
Bank cards are the most widespread payment
instruments. Credit institutions had issued 607,400 cards
by the end of 1997 (see Table 6.2).
27.9% of the bank cards were passive, not used during a
month. Among new trademarks, Cirrus/Maestro debit card
came into use. It should replace local debit cards issued
by some credit institutions. Due to Cirrus/Maestro the
number of international bank cards tripled in 1997.
The number of ATMs doubled and their use widened in
1997. About three quarters of them permit cross-usage of
local cards issued by different credit institutions as
well as the use of VISA and Eurocard/MasterCard,
international bank cards issued in any country of the
world (see Table 6.3). Apart
from regular cash and payment dispensers, the ATMs
accepting cash payments were introduced. By the end of
1997 there were 12 such ATMs.
In 1997, the number of points of sale (POS) accepting
bank cards increased about 80%.
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