Retail Payment Systems
In the OIC Member Countries
15
such as the National Automated Clearing House Association (NACHA) also continue to
introduce new products and services as well as distribute costs and limit risk exposure.
2.3 Classification of Retail Payment Systems
Retail payment systems can simply be divided into two broad categories: cash and non-cash
payment systems. Non-cash payment systems consist of cheques, debit cards, credit cards,
internet (online) payments, and mobile payments. They each have distinct legal
characteristics, technical features and systemic risks.
1. Cheques: A cheque is a written, dated and signed instrument that contains an
unconditional order from the drawer that directs a bank to pay a definite sum of money to
a payee. For most of the twentieth century cheques dominated non-cash methods of retail
payment, only slowly superseded first by credit cards and later other instruments and
methods.
2. Credit cards: A card issued by a financial company giving the holder an option to borrow
funds, usually at point of sale. Credit cards charge interest and are primarily used for
short-term financing. Interest usually begins one month after a purchase is made and
borrowing limits are pre-set according to the individual’s credit rating.
3. Debit cards: A payment card is issued as either a PIN-based debit (ATM) card or as a
signature-based debit card from one of the bankcard associations. A payment card is
issued to a person for purchasing goods and services through an electronic transfer of
funds from a demand deposit account rather than using cash, checks, or drafts at the point
of sale.
4. Internet (online) payment: An online payment service allows buyers to use a credit card or
electronic bank transfer to pay for goods or services purchased online. Online payment
refers to money that is exchanged electronically. Typically, this involves use of computer
networks, the internet and digital stored value systems. Payment processing for online
vendors, auction sites and other users are provided by services such as Paypal, whose
revenue is based on per-transaction fees.
5. Mobile payment: Money rendered for a product or service through a portable electronic
device such as a cell phone, smartphone, tablet, PDA, or other mobile device. Mobile
payment technology can also be used to send money to friends or family members. There
are more than 120 mobile payment projects developed in at least 70 emerging markets
(Beshouri et al., 2010), however, it has only taken off in a couple of countries.