Retail Payment Systems
In the OIC Member Countries
16
Additionally, according to the classification of the Bank for International Settlements [BIS]
(2003; also used by the CPSS 2012 report), there are seven main instruments that differ in
their form, systems architecture, accountability, governance and other criteria:
1. Cash. The oldest and most widely used instrument is cash. In terms of number of
transactions, ‘cash is (still) king’: the average person makes some 500 payments a year,
and cash is used for the majority of these. There are relatively few sources of hard data on
cash transactions; neither the number of transactions nor their value is known with any
certainty. Most data rely on samples and surveys, which are not always accurate, since
people tend to underreport their small purchases.
2. Checks. This instrument is the most widely used non-cash instrument in leading
economies (the BIS-11 countries). This is largely driven by Americans, who write 80% of
all checks. Most of these are the familiar non-guaranteed checks written from a checkbook
by consumers and businesses, although traveller’s checks, Eurocheques and bankers drafts
are also included in this category. While easier to track than cash, data on checks are not
entirely reliable.
3. ACH credit transfers. ACH (automated clearing house) credit transfers are used for many
of the same transactions as checks but unlike checks they are seldom used at the point of
sale (PoS). They differ from checks in that they are sent to the bank of the payor; this bank
then executes the transaction either in-house (if the payee also has an account with the
bank) or through a clearing house. Technically this category also includes large value
transfer systems that are mainly used for interbank payments, such as Fedwire and Target;
these real time gross settlement (RTGS) systems directly post transactions to central bank
accounts as they occur, providing immediate finality of payment.
4. ACH direct debit. In a direct debit the payor (debtor) has authorised the payee (creditor)
to present the bank of the payor with an amount and account number to be credited. Direct
debits are cleared through the same ACHs as credit transfers, and rely on much of the same
technology.
5. Credit card payments. These are payments using cards at the PoS, where the money is
debited to a ‘card-account’. The resulting balance is usually presented monthly to the
cardholder. If creditors have the option to pay only part of the balance then it is a true
credit card, otherwise it is a charge card or a delayed debit card. This category includes the
charge and credit cards of Visa, MasterCard, American Express, Diners, etc., as well as
many retailer cards (e.g. department stores and petrol chains).
6. Debit card payments. These are card transactions that are directly debited to a demand
deposit account. Two varieties of debit cards exist: (1) PIN-debit, where the customer uses