Retail Payment Systems

In the OIC Member Countries

1. INTRODUCTION

A sound and stable macroeconomic and financial system is a prerequisite for enhancing the

visibility of financial markets and building institutional capacity for financial systems. The

existence of a wide range of payment instruments is essential to support customers’ needs in a

market economy. A less than optimal use of payment instruments may ultimately have

negative impacts on economic development and growth by for example distorting markets,

raising transaction costs, or discouraging trade. Moreover, the safe and efficient use of money

as a medium of exchange in retail transactions is particularly important for the stability of the

currency and a foundation of the trust people have in it.

Since the first decade of the twenty-first century, many innovations in retail payments have

been launched. This has influenced the way consumers choose to pay and shapes payment

processes. Innovations in retail payments not only decrease operating costs and processing

times, they also increase social welfare. However, these innovations have raised several issues

regarding the stability, robustness, as well as effectiveness of the retail payment systems.

1.1 Retail Payment Systems in the OIC Member States

Retail and bank payment systems have become a focus of concern along with other aspects of

financial services, all the more so after the recent financial crises (CGAP, 2008) and the

coincident proliferation of digital payment systems. Central banks, ministries responsible for

monetary stability, large and small businesses all have expressed anxieties about how it is best

possible to monitor, enforce and control the proliferation of payment systems and to ensure

that they are beneficial to the national economy and consistent with national law. Numerous

retail payment services are being introduced, including access to electronic payments and

internet banking, and yet many of these efforts fail.

The OIC Member States are expected to continue expanding their economy supported by

technological change and growth momentum among the major economies. A significant

contributors to the broader stability and effectiveness of financial systems are retail payment

systems, particularly in ensuring consumer confidence and contributing to the functioning of

commerce (CPMI, 2014). The safe and efficient functioning of retail payment system is

undoubtedly becoming a core concern of most central banks. However, most retail payment

For example, most, if not all, of the dozens of mobile payment services available in EU countries and listed in the Electronic

Payment Systems Observatory (ePSO) database in 2002 now have been discontinued (Carat, 2002). In other study, Dahlberg

et al. (2008) questioned why some initiatives such as Visa Electron and Paypal were highly successful while most mobile

payment initiatives were remained stagnant.