A few key thoughts for 2012
Date: 18 Jan 2012 Comments:0Some points to think about as we enter the new year:
- With the global economic crisis showing no sign of abating, it’s more than ever imperative for governments around the world to ensure that their financial systems are efficient, cost-effective and as fraud resistant as possible.
- Estimates suggest that in many countries the cost of tax evasion, avoidance and non-payment is equal to the entire national budget deficit.
- Modernization of payment methods – including the concept of ‘the cashless society’ – is the key to increasing tax income without raising tax rates.
- Mobile phone based payment systems are the fastest growing area of cashless financial transactions – and with over 5 billion mobile phone users worldwide, compared to just 2 billion bank account holders, the potential is huge.
- Governments and financial structures are having to become increasingly accountable to citizens and taxpayers, with demands for systems to be fair, accountable and efficient.
RTpay’s system of automated real-time collection of taxes and payment of benefits via a central server-based system, modeled on those used in the credit card and transaction processing industries, ensures that tax is collected and benefits and microfinance payments made available in the most efficient, cost effective and fraud-proof way possible.
The system is swift and simple to implement, requires little or no up-front capitalization from governments, and ensures both an increase in tax revenue and an ongoing income stream for operators.
RTpay has worked for six years on solutions for real time tax collection and the systems needed to create it. We charge no fees; we are entirely self-funded so we have no obligations to anybody other than the taxpayer/ citizen.
What we do have is a wealth of expertise and knowledge in the area of financial transactions, electronic payments technologies and new cashless transaction methods. We also have the experience and skills in working with government departments and multinational organizations in Europe and the developing world.
We have created the practical tools and strategic partnerships to bring about a swift and cost-effective solution.
Cashless transaction systems
Transaction processing has until now concentrated largely on inter-bank and card-based payments. Cash has been used as the primary form of payment in all but the most sophisticated of countries. This has created major inefficiencies in administration and reduced the level of tax collection, security and data control.
This situation is in a state of change; a change that will be rapid, multi-faceted and liable to create chaotic levels of risk for Central Banks around the world. And yet it also creates enormous opportunity – if it can be managed effectively.
The increasingly widespread use of financial transactions using mobile phones – and to a lesser extent, social networking, coupon marketing and non-bank stored value cards – has created a new market of billions of people.
What is required is a way in which to assist Central Banks to control these markets by the provision of a central clearing service that handles transaction and data flow, incorporating real-time fraud analysis. All licensed phone payment service providers and other electronic payment systems would be required to route transactions through the central server, creating interoperability and security.
A number of international organizations (including the World Bank, IFC, ITU, UNDP and ISO) are now working to provide solutions in this area that will be feasible, available and scalable for all governments. A significant feature is that developing countries are often leading the way – as they have the greatest number of people with little or no banking structure, minimal legacy technology infrastructures and an already widespread mobile phone user base, creating an open market opportunity for the new technologies.
The best known example is in Kenya, where a Vodafone subsidiary, M-Pesa, has become a dominant part of the financial system. This has been treated as an example of how to establish such a mobile phone-based system – but it does carry significant risks and inefficiencies from which other countries are learning.
In short, the weak points are:
- There is little interoperability with other payment methods, including users of alternative phone services.
- This limitation means multiple agents are required – one in each area for each phone provider – and therefore raises costs.
- The accounting systems of MNOs (mobile network operators) are not under the same management and reporting structure as banks.
- Even when an MNO is required to work with a commercial bank, the accounting is still open to far greater risk than is normal under banking regulations.
- No real-time analysis is implemented on payments as there is no clearing format.
- This means that AML (Anti Money Laundering) techniques are generally applied too late to be effective, if at all.
The RTpay solution
The RTpay solution is based on a central clearing function between the mobile phone-based transactions. The optimum security is applied when the MNOs are solely messaging entities, while the funds are held by the central bank or designated commercial financial entities.
Tax collection ratios can be significantly improved if electronic transactions are processed using a coherent, coordinated and centralized system, particularly if due tax can be collected during the course of the payment.
With efficient tax collection leading to greater tax revenue, it becomes more feasible for benefits to be paid, infrastructure to be improved and sustainable capacity building to be achieved – and financial inclusion can become part of every citizen’s opportunity.
Over the next twelve months we will address multiple aspects of the risks, opportunities and linked facets of this momentous change – and the likelihood of action to bring this about in various countries around the world.
For specific consulting advice, please contact us at info@rtpay.org or by phone on 1.561.278.7668.
