The Hindu Business Line : Cyber money isn't guv's worry

The volume and value of Internet and mobile payments are still insignificant in terms of the retail payments market as a whole, says a recent report. E-money is only a speck on the horizon.

A RECENT report from the Bank for International Settlements (BIS) is about e-money and Net payments. This is a mammoth work from the BIS's Committee on Payment and Settlement Systems, because the survey factors in responses from nearly a 100 countries, including India. It discusses two types of payment products: Reloadable electronic money instruments in the form of stored value cards and electronic tokens stored in computer memory; and Internet and mobile payments.

A definition of e-money that the report refers to is from the European Parliament and Council Directive: "Electronic money shall mean monetary value as represented by a claim on the issuer which is: (i) stored on an electronic device; (ii) issued on receipt of funds of an amount not less in value than the monetary value issued; (iii) accepted as means of payment by undertakings other than the issuer". As a multipurpose means of payment "in contrast to the many existing single purpose prepaid card products," e-money has a distinct advantage as `electronic purse' or `digital cash'. That's because card-based e-money can `facilitate small-value face-to-face retail payments', while network-based e-money helps one pay over the Net. It may come as surprise to know that while card-based e-money is "operating relatively successfully in a sizeable number of countries surveyed" including India, China and so on, Canada, the UK and the US have discontinued "some of the e-money schemes".

Again, e-money has all the looks of a success at national level, but what have been "comparatively successful are e-money products supported by public transport and public telephone companies, and parking meter or vending machine operators." What can add to your worry is that many central banks are not too enthusiastic about introducing e-money schemes in the near future. Network (or software) based ones have fared worse: Too few countries where such schemes are operational, and too limited in usage, scope and application. And that should make you wary about flaunting digital cash.

On the statistics front, data on e-money schemes are "relatively limited".

Also, limits are low, "typically a few hundred US dollars", and "transferability of value from purse to purse without the involvement of the issuer is not available in virtually any scheme". More bad news in the report for e-money lovers follows: While the number of cards issued and the number of merchant terminals available for e-money transactions are considerable, outstanding e-money balances (float), as well as the volume of transactions, remain small in most cases. Value of daily transactions is low because of low levels of usage and low average value of the transactions. "The limited data available on the float, volume and value of daily transactions, in respect to network-based e-money schemes, suggest that these are very low."

The mobile segment uses two business models for payments, states the report: "Paying from a prepaid balance or paying later along with the mobile phone bill." However, on Net payments and mobile transactions too, statistical data are `relatively limited' at the BIS. "The volume and value of transactions are still low in many countries, while in some (for instance, in Estonia) they represent a considerable market share."

The report devotes considerable attention to policy issues relating to these new payment methods. A couple of stark statements that take the steam away from any possible hype are these: "E-money is not expected to have major implications for monetary policy implementation... Responses to the survey indicate a general consensus that the volume and value of Internet and mobile payments are still insignificant in terms of the retail payments market as a whole and as such do not pose major policy issues for the central banks."

ITworks@thehindu.co.in

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
When minutes matter

No bone of contention

Nurturing the small guy

Cyber money isn't guv's worry

Booting Linux

Problems with Internet Explorer

All in one dance

Worth a close-up

Choose your side of the road

Track the TRIO

Quiz

Breathe life into great ideas

Cartoon