Mongolia Steps Up Banking Security Measures to Enhance Financial System Stability

Introduction

The Bank for International Settlements (BIS) defines a payment system as a vital component of financial market infrastructure, aimed at enhancing stability, reducing transaction costs, promoting efficient use of financial resources, and improving liquidity. In line with international trends, the responsibility of central banks to ensure stability, reliability, and efficiency of the payment system has increased globally.

Mongolia’s Efforts

To address this challenge, Mongolia has introduced significant reforms to its legal environment, approving the Law on National Payment System in May 2017, which became effective on January 1, 2018. The law establishes a legal and organizational framework for the national payment system, governing procedures for providing payment services and activities of participants.

Role of Central Bank

The Central Bank of Mongolia plays a crucial role in ensuring the safe, efficient, and smooth operation of the national payment system, managing, regulating, and overseeing its activities. The bank defines national payment system policy, issues licenses to participants, approves rules and regulations, monitors activities, and performs other prescribed functions related to payment, clearing, and settlement systems.

Payment System Structure

Mongolia’s payment system consists of three subsystems:

Real Time Gross Settlement (RTGS): For large-value transactions over MNT 3 million per transaction
Automated Clearing House (ACH +): For low-value payments amounting to MNT 3 million or less
Interbank Payment Card System: Processed through the National Electronic Transaction Center (NETC) of the Bank of Mongolia infrastructure, with final settlement taking place in the RTGS system

Increasing Competition

Competition in the payment system arena has intensified as non-bank financial institutions and other payment service providers compete directly with banks, introducing new payment products and services using latest technology. Payment instruments and channels used in Mongolia include:

Cash
Internet banking
Mobile banking
Payment cards
Remittances
E-money
Billing

Conclusion

Mongolia’s efforts to enhance banking security measures are crucial for maintaining financial system stability, reducing transaction costs, promoting efficient use of financial resources, and improving liquidity. The country’s payment system infrastructure is modernizing rapidly, driven by technological advancements and increased competition in the market.