Perfecting the mechanism for managing payment activities through payment service providers in Vietnam

- Domestic payment by collection order: Collection order is used to pay fixed or different values and different periodic payment times, the beneficiary is the person who prepares the payment transaction via computer by debiting the account of the payee and transferring it through the BACS system (Automated TTBT System). This form is only allowed by organizations authorized by the Bank to perform this payment method and it is strictly implemented according to the instructions authorized by the customer, at the same time each participating organization must guarantee to the Bank that in case of error, the Bank will pursue the customer if the customer's account is debited not according to the instructions. This form is especially useful for insurance companies, housing savings associations, hire purchase companies and any organization that receives a large number of payments, saving costs for the beneficiary in the management process.

- Domestic payment by credit card: This card is issued by banks, housing savings associations or other organizations to help buy goods and services and pay later. Payment is made at places with special machines to create invoices and record transactions at retail points with credit card symbols that they accept.

- Domestic payment by POS and debit card: This system is located at retail points for customers to insert their cards to check and pay.

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- Domestic payment by Bank draft: Bank draft is a payment instrument similar to a check, issued by a Bank at the request of a customer to make a guaranteed payment, used in cases where the beneficiary requires a guarantee that the check will be paid upon presentation.

- Domestic payment by telephone and computer transfer: It allows same-day transfer. Telephone transfer is usually made through the Head Office of the relevant Bank while computer transfer is made through the CHAPS automated TTBT system.

- International payments by check and credit card.

- International payment by international money transfer: Transactions can be transferred by mail or via TELEX, SWIFT network through branches or agents abroad, reflected on NOSTRO and VOSTRO accounts.

- International payment by Bank draft: Bank draft is used in international payment similar to using draft in domestic payment but is drawn by the British Chamber of Commerce to the account of one of its agents. Usually an international draft uses many foreign currencies.

Payment method organization system in the UK [48]

- Inter-branch clearing: If the payer and the beneficiary have accounts in

different branches of the same bank.

- “On-site” clearing: If the payer and the beneficiary have accounts at the same branch of a Bank.

- Interbank Clearing: If the payer and the beneficiary have accounts

at different banks.

The Interbank Clearing System is under the control of three Companies, each of which deals with a different aspect of clearing and settlement.

+ Clearing of documents: Including check clearing and transfer notices (performed by the Check and Transfer Clearing Company), in which the check clearing system has been implemented since 1773, the transfer clearing system has been implemented since 1960.

+ Daily large value clearing: Including automatic TTBT system (GAPS) and intra-city clearing (performed by Automatic TTBT and intra-city clearing company).

CHAPS was introduced in 1984. With this system, payments cannot be withdrawn once they have been accepted by the system. Therefore, the money is guaranteed and can be withdrawn by the beneficiary immediately when needed. Transfers are limited to £5,000 or more.

The Intra-City Clearing System is a rapid clearing service provided by Bank branches in the City of London within a short distance of the clearing centre at Lombard Street. It is available for cheques drawn on

£100,000 or more.

+ Electronic clearing (Automatic Bank Transfer Service performed by BACS Company). The system transfers money by recording on magnetic tapes.

The activities of these three companies are under the control of the ABACS TTBT association. In addition, there is a fourth company that carries out electronic money transfer transactions at POS (EFTPOS Ltd).

+ Daily payment (settlement) transaction: Is a method of balancing in the exchange of checks and transfers between banks. It is carried out at the end of the working day to clear the previous day. Each clearing bank prepares a list of receivables and payables from other banks through the clearing house. The list is added up and the final balance is calculated as the net value of receivables (payables) for the transaction. This difference is settled by deducting or crediting to the banks' accounts at the Bank of England.

On payment management in the United Kingdom (UK) [48]

When it comes to management, there are some legal differences between the UK and other countries as follows:

Firstly, the statutory law relating to payment services in the UK is very limited, generally too long for the use of paper cheques and bills of exchange in payment, so two acts cover almost the entire body of this law: the Bills of Exchange Act 1882, which is a comprehensive codification of the existing law on bills of exchange: and the Cheques Acts, 1957 and 1992, which amend the general principles of the 1882 Act as they apply to paper cheques.

Second : The early birth and operation of the Association of Payment and Clearing Services (APACS).

The Association for Payment and Clearing Services is the organisation responsible for providing and developing payment and clearing arrangements in the UK and for investigating developments in payment systems generally. It operates the clearing of cheques and paper credit transfers as well as electronic debits and credits and high value transfer processing systems in the UK.

The Association of Payment and Clearing Services (APACS) was founded in 1985 to research, organize, develop membership and monitor payment systems.

The UK clearing system was developed by the Child Committee, established in 1984 by the banks then participating in the Bank Clearing House. The result of this development was the “Settlement and Clearing Systems” of December 1984 (Child Report). The two main elements of this work were a new structure for the organisation of the payment and clearing systems and new rules for the membership of these systems.

This was followed by separate companies established under the auspices of APACS to operate each clearing system, with the control and ownership of the organization and the individual companies held by the member organizations. By separating the clearings into three separate companies, an organization could be a direct member without being an indirect member. Membership of a clearing company was coupled with membership of APACS and of its governing organization, the Council.

Membership of each company is open, subject to payment of the appropriate entry fee, to all institutions that fully meet the clearly and fully articulated criteria. These criteria have been carefully reviewed and found to meet the requirements.

 Through the above characteristics of payment activities in the UK, we can see that: The organization, implementation and management of payment activities are by the Association of Payment and Clearing Services (APACS). So what is the role of the Central Bank?

There is no legal or regulatory oversight of payment systems operating in the UK, although the Bank of England maintains a close involvement in these payment systems. Commercial banks currently have membership of APACS (“settlement members”). The Bank of England is also a member.

The Bank of England's banking business is closely related to acting on behalf of government clients and issuing banknotes. It does not make commercial lending and has only five branches.

In general, government agencies are not required to open accounts with the Central Bank. However, most large agencies open accounts with the Central Bank to facilitate

for the efficient operation of central government accounts. The Central Bank acts as a clearing agent through the APACS clearinghouse for most government payable orders1 issued through the Paymaster's Office, Land Revenue, Customs and Excise Department.

The Bank provides a range of other banking services, including clearing facilities, to a number of public sector organisations, UK and international financial institutions (such as building societies and other central banks) and also to its staff. The Bank also holds the settlement accounts of all full members of APACS.

2/ Japan [48]

* Payment activities and payment management in Japan have the following characteristics: [48]

First, bank notes and coins are the dominant retail payment instruments. Cheques are not popular in the private sector, although they are widely used in the corporate sector. To meet the huge demand for cash, banks have installed a large number of cash-dispensing machines (CDs) and automated teller machines (ATMs). MICS (Multiple Integrated Cash Services) connects the CDs and ATMs of individual banks into the world's largest unified CD/ATM network.

Second, direct debit/credit services are widely used. The “unified account” service - a service that connects a demand deposit account (“normal deposit” 2 ) with a term deposit account - facilitates direct debit. If there are insufficient funds in the demand deposit account, the shortfall is automatically covered by a term overdraft. Direct debit is widely used to pay credit card bills and fees.

public utilities such as electricity, water, etc. Direct credit services are widely used for paying salaries, dividends and pensions.

Third, the region is deeply involved in payment services. With a national network (24,000 offices compared to 15,000 bank branches), Post Offices

1. These are instruments very similar to checks, used by government agencies to make payments.

2. “Ordinary deposit” is a type of demand deposit based on a non-drawn check. Other types of deposits are deposits based on drawn checks, deposits for tax payments, etc.

provides payment services such as money transfers, direct debit and credit through its CD/ATM network. These services of the Post Office compete with payment services provided by the private banking sector.

* General legal bases for payment [48]

In Japan, the following three types of laws form the legal framework for payments:

(i) Laws that prescribe the institutional contents of credit institutions and authorize them to issue means of payment; this category includes the Bank of Japan Act of 1942, the Banking Act of 1981, the Long-Term Credit Bank Act of 1952, etc.;

(ii) Laws specifying how the means of payment are to be used; this includes the Currency and Coinage Act 1988, the Bills Act 1932, the Cheques Act 1933, the Prepaid Cards Act 1989; etc. transfers between postal accounts and postal bills are governed by the Postal Savings Act 1947, the Postal Giro Act 1948 and the Postal Bills Act 1948.

(iii) Laws regulating obligations between parties using means of payment; the main points of this category are the Civil Code and the Commercial Code; contracts made between parties including the rules of privately managed payment systems also fall within this category.

* Payment service providers [48]

a/ Banking System

Banks in Japan are classified as follows:

(i) Commercial banks; this type of banking includes city banks, regional banks including members of the Second Regional Bankers Association (region II banks), trust banks and long-term credit banks;

(ii) Foreign banks and foreign-owned trust banks in Japan;

(iii) Financial institutions focused on lending to small businesses; this category includes Shinkin Banks, Shoko Chukin Banks, credit cooperatives and credit unions;

(iv) Financial institutions focused on lending to agriculture and fisheries; this category includes Norinchukin Bank, agricultural cooperatives and fisheries cooperatives;

(v) Government financial institutions play a complementary role in the banking industry; this category includes banks such as the Development Bank of Japan, the Export-Import Bank of Japan, etc.

A variety of payment services are offered by the banking system. Banks have jointly established interbank payment networks such as local check processing and clearing centers, the Zengin Data Telecommunication System (Zengin System), the Foreign Exchange Yen Clearing System (FEYCS), and they perform final transfers in BOJ accounts to settle interbank/third-party transactions.

To meet the high demand for cash by the public, banks have established a national CD/ATM network.

At the same time, banks provide debit/credit services based on tripartite agreements between payers and payees. EFTPOS debit cards are also issued by banks, which are used via the banks' EFTPOS systems.

b/ Post office

As a major government financial institution, the Post Office plays an important role in payment services. In addition to financial services such as postal savings, insurance and postal pensions, the Post Office also provides payment services using transferable deposit accounts such as: (i) money transfer; (ii) CD/ATM network services; and (iii) pre-arranged salary crediting and debiting of utility charges such as electricity and water, etc.

All of these services compete with those provided by private financial institutions. Postal savings totaled 167 trillion yen ($1.3 trillion) at the end of 1992.

c/ Other non-bank organizations

Technological advances, particularly in telecommunications, have enabled non-banking institutions such as securities firms, insurance companies, finance companies (including card companies) and retailers to compete and/or cooperate with banks in the payments sector.

One of the services provided by non-banking institutions is the “fund consolidation account” service provided by securities companies, which is a combination of neutral funds at securities companies for investment in medium-term government bonds and demand deposits at banks. In this service, when the balance of a customer’s demand deposit reaches a predetermined level, any money coming into this deposit account will be automatically transferred to the customer’s money account at a securities company. If the customer’s demand deposit falls below the prescribed level, the shortfall will be automatically compensated by the neutral fund so that the balance in the demand deposit will be kept at the prescribed level. Non-banking institutions also offer a similar service, money from a customer’s demand deposit account that exceeds the prescribed level will be automatically transferred to the customer’s time deposit account…

* The management role of the Central Bank [48]

By law, the Bank of Japan is responsible for maintaining and ensuring a safe and sound financial system. In this regard, the Bank of Japan provides the means of payment of last resort, i.e. bank notes and BOJ accounts, and, when necessary, also functions as a lender of last resort. It also conducts on-site supervision and inspection of its client financial institutions. Specifically:

a/ Is an organization that issues bank notes

The Bank of Japan is the sole entity authorized to issue bank notes in Japan (Bank of Japan Act, Article 29), which are widely used as a means of payment. In order to enhance the reliability of bank notes, they form an important basis for the national payment system.

Perfecting the mechanism for managing payment activities through payment service providers in Vietnam - 7

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