Retail Payment Systems
In the OIC Member Countries
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our knowledge, there is no research that calculates the cost of payment systems and its impact
on the economy in the context of OIC member countries in particular.
There is no satisfactory explanation for the country differences. Empirical studies find that
country idiosyncrasies rather than variables such as GDP and crime explain the differences in
instrument usage. There is strong empirical evidence that network externalities exist in
payment instruments such as ACH transfers, debit- and credit card payments and ATMs. The
substantial literature on network effects shows that indeed lock-in into an inferior
unsponsored standard can occur if the interests of players are not aligned and/or if players
have incomplete information about each other’s interests (see Humphrey et al., 2000 on
barriers to shift from paper cheques to electronic payment in the United States, and Van Hove,
2002 on the ways in which hidden subsides for cash systems have created barriers to change).
Sponsored standards may reduce, but not eliminate, the occurrence of lock-in, depending, to
some degree on the extent to which explicit costs are presented and how consumers might be
rewarded for paying with efficient instruments. Spatially separated users may adopt different
standards, although the existing models are not readily applicable to a setting of semi-autarkic
countries.
2.5 Economic Context of OIC Member Countries
The economic characteristic of the Organisation of Islamic Cooperation (OIC) Member States
involves the economies of 57 countries. Of those, 49 are predominately Muslim states, while
the other 8 have large Muslim minorities. While few offer only Islamic finance options, many
have institutions of Islamic finance available in the market. Those 57 countries have a
combined GDP of US$7,740 billion (PPP). The richest country on the basis of GDP per capita at
PPP is United Arab Emirates. On basis of per capita GDP, Qatar is richest country with incomes
exceeding US$108,000 per capita. OIC countries are widely argued to have been relatively
resilient to and remained unaffected by the recent global financial crisis (SESRIC, 2013).
As a substantial group of the world’s developing countries, OIC member countries have
attracted a small share of the total FDI flowing to developing countries (Hassan, 2009). The
two major OIC member countries attracting the bulk of FDI flows over the last two decades—
Indonesia and Malaysia, were among the Asian countries that felt the brunt of the financial
crisis. The services sector is an important source of income in almost all the OIC countries,
followed by agriculture and industry (Hassan, 2009). The manufacturing sector does not play a
significant role in most of the OIC economies. Yet, in some OIC countries, particularly in the