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POLICY RESEARCH WORKING PAPER 1519
Payment Systems in Latin Colombia and El Salvador
should
consider {among
Am erica
other things)
developing an
automated clearinghouse -
to make
direct deposit
and
A Tale
of
Two Countries
direct
credit systems
more
efficient
and to serve
as a
Colombia and El Salvador platform for electronic
interbank
payments.
Robert Listfield
Fernando Montes-Negret
The
World
Bank
Financial
Sector
Development
Department
October 1995
Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure Authorized
P IOLicY
RFSEARCH WORKING
PAPER
1519
Summary
findings
Payment systems
include
all the paper
(including cash)
processing
in Colombia
(which
has too many
local
and electronic systems a country uses to exchange
clearinghouses) than in El Salvador (which has too
few).
financial
value to discharge
obligations.
Financial
Both countries
need a more
balanced approach.
markets rely
on promptness
and certainty
of payment
* Same day
payments are
possible in Colombia;
and settlement
for borrowing
and
investing.
Consumers
payments
in El Salvador
are next day,
at best.
want convenience,
choice (of payment
options),
privacy,
* Financial
markets
are less
mature in El
Salvador and
and
low cost. Inefficiencies
in payment
systems
cause a
may not need
to be as sophisticated
as markets
in other
drag
on the national
economy.
Listfield and Montes-
countries.
Negret
compare
trends and
areas for improvement
in
* Colombia
has yet to create
effective
disincentives
for
payment systems
in Colombia
and El Salvador,
two
writing
checks against
insufficient funds.
countries
that differ
in size, volume
of check-based
Both countries
must
take certain actions
to develop
a
transactions,
and
national issues.
system for
electronic
payments and
the settlement
of
Check
standards
have developed
slowlv in
both
payments
at the central
bank:
countries,
which has
retarded automation,
particularly
in
* Draft new
laws and regulations.
Colombia,
where
the volume
of checks
handled makes
* Provide more
systematic
data collection
and analysis
manual
processing
unmanageable.
Both countries
need
of payment
flows.
stronger
leadership
from central
banks and bankers
* Undertake
more risk analysis
and prevention
in the
associations;
incentives
to adopt common
check
central banks
and supervisory
agencies,
and draft
standards;
streamlined
check sorting
and encoding,
contingency plans
for major
failures.
microfilming,
and
manual data processing;
alternative
* Reexamine
the dual roles
of the central
banks and
(especially
credit-based)
payment mechanisms
and
other
government
agencies in operating
and supervising
private
check-processing
bureaus;
and settlement
of stock
payment
systems.
exchange
transactions
through
several banks,
rather than
*
Review check-clearing
pricing
policies.
one
bank.
* Analyze
the economics
of automating
check
The countries
differ in important
ways:
processing.
- It will
be easier
to reach economies
of scale in
check
This
paper-a
product of the
Financial Sector
Development
Department-
is part
of a larger effort
in the department
to examine
factors
constraining
the development
of countries'
financial
infrastructure.
Copies
of the paper
are available
free from the
World
Bank, 1818 H
Street NW,
Washington,
DC 20433. Please
contact Susana
Coca,
room G8-017,
telephone 202-473-7664,
fax 202-
522-3198, Internet
address
fmontesnegret(qsworldbank.org.
October 1995.
(37 pages)
The Policy Research
Working Paper
Series dissemrinates
the findings
of work in progress
to encouirage
the exchange
of ideas about
development issues.
An objective
of the series is
to get the findings
otut quickly, even
if the presentations
are less
than fully polished.
The
papers carry the
names of the authors
and should
be used and
cited actaordingly.
The findings,
interpretations,
and COnICIU51io,s
are the
authors own
and should not
be attributed to
the World Bank.
its Executive Board
of Directors,
or any of its member
countries.
Produced
by the Policy
Research D)isemimnatrion
Ccnrcr
Payment
Systems in
Latin America
A Tale of
Two Countries:
Colombia
and El
Salvador
Robert
Listfield
and
Fernando
Montes-Negret
Robert
Listfield,
Principal,
EDS Management
Consulting
Services
Fernando
Montes-Negret,
Principal
Economist,
Financial
Sector
Development
Department
of the
World Bank
This paper
is based
on the findings
of a
short mission
that visited
Bogota
and
Cali, Colombia,
and San Salvador,
El
Salvador
in April
1995. The
authors
want to
express their
gratitude
to the
Central Bank
of Colombia
(Banco
de /a Republica)
and
the Central
Bank of
El Salvador
(Banco
Central
de Reserva
de El
Salvador)
for the
excellent
cooperation
and warm
hospitality
extended
to them.
The authors
also
want to thank
the numerous
agencies
and people
visited
during
the mission
for giving
them time,
sharing
views, and
providing detailed
information.
An earlier
version of
this paper
was presented
at
a seminar
on "Payment
systems:
Principles
and Practices,"
sponsored
by the World
Bank
and
CEMLA
in Mexico
City, July
25-28,
1995. Ms.
Tomoko
Ishibe provided
invaluable
secretarial
support.