ChangingtrendsinpaymentsystemsforselectedG10andEUcountries1990-1998.docVIP

Changing trends in payment systems for selected G10 and EU countries 1990-1998 By Sheri M. Markose and Yiing Jia Loke Economics Department, University of Essex, , UK.March 2000. Published in International Correspondent Banking Review Yearbook 2000/2001, April 2000. In the study based on the transactions data in payment systems for selected G10 and EU countries over 1990-1998, we have identified four main trends. Firstly, the overall trend in the payment system is for a move from cash to non-cash payment instruments. Secondly, paper based non-cash processes which include cheques and paper giro are being replaced by electronic processes such as direct debits and electronic credit transfers in large payments and in the retail sector by EFTPOS (Electronic Fund Transfer at Point of Sale) utilizing debit and credit cards. Thirdly, in cash dispensing, bank based cash withdrawals have given way to ATM (Automated Teller Machines) networks that enable the consumer to have access to cash closer to point of sale. Lastly, electronic money with reloadable purses sometimes generically referred to as smart cards are being piloted by government and private credit institutions. Interbank or correspondent banking methods of clearing play a crucial role in traditional payment systems. These vary from relatively simple national arrangements to complex international electronic networks. The principal electronic payment systems for large U.S dollar payments are Fedwire and Clearing House Interbank Payment System(CHIPS). Automated Clearing House(ACH) is the US small payments clearing system while Bankers Automated Clearing Services (BACS) is the equivalent one for the UK and CHAPS is for large payments. These national clearing systems are known to turnover the equivalent of the annual gross product of their respective countries in a matter of days. Two multicurrency schemes that were recently developed are the Exchange Clearing House Organization (ECHO) designed by a group of