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Title: Rouben Indjikian

1

E-Payments, E-Finance and SMEs Implications for
transition economies

Rouben Indjikian
Senior Economic Affairs Officer
E-Commerce Branch, SITE, UNCTAD
UNCTAD-UNECE Conference on ICT and E-Business
Strategies for Transition Economies, Geneva 20-21
October 2003

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Outline

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The Future of E-Finance E-Banking and
E-Brokerage

According to a forecast the e-banking share in
banking sector of developed countries might
increase to up to 50 in the middle of this
decade, while in many DEs and TEs it can reach
between 20 and 35-the latter in case of
improved policy environment.
In the case of e-brokerage that share might reach
80 in developed countries and from15 to 40
(improved policy) in emerging ones.
In fact Estonia is one of the world leaders in
e-banking
Future?- personalised WebPages where clients
assets and liabilities are programmed to optimise
their future cash flows and investment decisions
based on future incomes, preferences and online
advise of financial intermediaries.

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E-Finance for SMEs selected B2C online
payment instruments

Credit, debit cards and prepaid cards getting
combined into smart cards (Visa, MasterCard, Amex
etc). So far smart cards represent less than 10
of all cards and a bulk of it is in B2C. However,
in 2-3 years they might capture from one third to
half of the cards market.
Digital wallets (Yahoo Inc., Microsoft Passport)
Peer to peer (P2P) payments (Paypal, BillPoint,
PayDirect)
Virtual escrow systems (escrow.com,
tradesafe.com)
Electronic bill payment and presentment or EBPP
(e-route, billserv.com, CheckFree).

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E-Finance and B2B selected online payment
instruments

Electronic checks, Electronic invoice payment and
presentment (EIPP)
Financial Services Markup Language (FSML),
digital signatures el al
Public key infrastructures (PKI) issues of
interoperability customisation, pricing,
governance and oversight
From Business banking to Internet banking FSTC
Bank Internet Payments System (BIPS) as a front
end to existing ACH debits and credit, wire
transfers and other networks
The new leaders - smart cards with decreased
costs in coming years they might capture the
considerable part of online payments market.
Increasing role in B2B payments as exemplified by
Visa Commerce Card.

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SMEs E-Business getting financed

As high perceived risks SMEs have difficult
access to bank credits.Venture capital, leasing,
are much less developed in TEs. Hence the need to
overcome market failures through national
governments and international support measures.
Apart from direct financing of SMEs governments
might ensure subsidies through tax and tariff
brakes and lower than market interest rates.
Guarantee programmes could also be instrumental
to raise credits and venture capital (VC) for
SMEs. Thus US Small Business Investment Act of
1958 endorsed SBA(Administration) guarantees to
cover SBIC(Corporations) risks. Since then the
venture capital industry thrived. Development
Bank of Puerto Rico is actually practicing card
based low cost credits for SMEs.
External programs for SMEs in CEECCIS from WB,
EBRD, EU, EIB, bilateral donors and NGOs as well
as international VCs, business angels, leasing
industry and others might correct the
inadequacies of local financing in many TEs and
help their SMEs and start ups to launch new
e-business and e-commerce.

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E-Finance for SMEs the opportunities of
e-marketplaces

E-markets for goods and services and large
e-procurement platforms might open chances to
SMEs from TEs to supply goods and services. As
trusted suppliers the SMEs might eventually get
e-finance, for pre-export, working capital etc.
Those SMEs, which adapt fast to EDI type foreign
trade and trade finance platforms for online
negotiation, contracting, delivery and e-payments
(Bolero, Tradecard , CCEweb etc), might greatly
benefit by participating online in trade and
payment transactions.

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Public and private e-procurement building up a
critical mass

Card based purchases by corporate and government
employees replacing paperwork.
Increasing use of smart cards facilitating the
dissemination of a culture of e-payments.
Governments and companies embracing the Internet
as a platform for networking within and between
themselves and streamlining services delivery and
procurement operations.
E-governments as primary drivers towards new
economy in many transition economies.

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E-Procurement opportunities for SMEs

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E-Finance new opportunities for transition
economies enterprises

Working with global and regional e-marketplaces
as suppliers and buyers might give access to
enterprises to advanced e-business models and
e-finance. Clustering might give a similar
effect.
Having ISP and Internet banking locally might
facilitate access to global e-marketplaces and
e-finance platforms.
Leapfrogging towards advanced Internet
technologies say through immediate introduction
of smart cards might push enterprises to start
doing e-business and seeking online short term
trade finance and even longer-term finance.
Skipping magnetic strip technology in Poland by
directly installing smart chip technology and
advanced acceptance terminals to backstop online
payment systems was an example of leapfrogging
Public-private partnerships with international
support might encourage entering into the world
of e-business and e-finance.