Retail Payment Systems

In the OIC Member Countries

3. OVERVIEW

3.1 Retail Payment Landscape

The retail payment market can be analysed in terms of payment service providers and

technology (Khiaonarong & Liebenau, 2009). Payment service providers are typically financial

institutions, such as banks, payment card issuers, or in a mobile payment context, mobile

network operators (MNOs). Financial institutions and MNOs may not only decide to cooperate

and collaborate, but also to compete against each other. Other actors such as newcomers and

intermediaries (i.e. PayPal, Google Wallet, Stripe, etc.) can be serious competitors as well.

However, there are no ‘one-size fits all’ rules to enhance success.

Thus, it is premature to

judge which retail payment model will prevail in what is worldwide a turbulent market and a

continuously changing industry.

CPMI (2014) broadly classify retail payment systems into two broad categories: banks and

non-banks. Banks are those institutions that mainly involved in taking deposits from the public

and providing loans, including commercial banks, saving banks, credit cooperatives, and so

forth. Non-bank institutions are defined as entities that are involved in the provision of retail

payment systems, yet their main business is not related to taking deposits from customers and

using the deposits to make loans (CPMI, 2014). Non-banks payment systems can be divided

into four distinct types: front-end providers, back-end providers, operators of retail payment

infrastructure, and end-to-end providers.

In 2012, CPSS conducted a survey on innovative retail payment initiatives and classifies into

the following categories (see the list below). In their report, they identified some pointers as to

what could be expected over the next couple of years, including technological development

that are likely to blur product categories, the potential growth of near field communication

devices (NFC), the growth of internet payments, as well as more global active players that

leverage their coverage and market power across countries. However, they also argue that

large leaps can happen especially in countries with underdeveloped payment infrastructures

and that there will be significant technological differences between regions (CPSS, 2012).

For example, Octopus cards in Hong Kong can be considered as a successful standalone payment system against

MasterCard and Visa, whereas MobiPay’s in Spain relies on the cooperation between MNOs and financial institutions.