Retail Payment Systems

In the OIC Member Countries

the same PIN as for an ATM, and the transaction is routed through an ATM network (or its

equivalent), and (2) signature debit; to a consumer and merchant these signature debit

transactions are very similar to a Visa or MasterCard credit card transaction, except that

they are directly debited from the consumer’s checking account.

Card-based e-purses and electronic cash. Card based e-purses are loaded from the current

account; this money can then be spent in stores, vending machines and over the phone or

internet. They have yet to gain wide usage. A different type is e-cash, where the electronic

‘bits and bytes’ represent real money payable to bearer. These bits can be stored on a

chipcard or on a hard disk. Again, usage has been disappointing: the best-known examples,

Mondex (cards) and eCash (hard disk), are both defunct.

The above list of instruments is neither complete nor unambiguous. It describes the main

classes and species.

It excludes for example the draft and bill of exchange, which are mainly of

historical importance. Also, new instruments keep appearing that are not easy to classify,

especially with regard to loyalty schemes, online payment practices and some e-wallet

novelties.

2.4 Characteristics of Retail Payment Systems

Payment systems in general exhibit a number of economic features such as large fixed costs,

variable costs, adoption externalities, and usage externalities (OECD, 2006). The fixed costs of

a payment platform include the extensive computer and communications infrastructure that

must be put in place by the platform and its banks, as well as the extensive infrastructure put

in place through merchant terminals and their intermediaries. Variable costs for the payment

platform may include manual authorisations that require intervention of individuals and

manual oversight of evolving fraud risks.

Network externalities have certainly existed in the area of retail payment systems. However

many payment networks display indirect network effects: for example the value of a credit

card to its holder depends on the number of merchants that accept it, not on the number of

other credit card holders; but since more card holders lead to more accepting merchants, an

increase in the number of card holders indirectly affects the network value to an individual

card holder. These may include adoption and usage externalities. To the extent that at least