Ranee Jayamaha: New opportunities in retail payments Speech by Dr Ranee Jayamaha, Deputy Governor of the Central Bank of Sri Lanka, at the IBA-Finsight Payment Systems Summit 2008, Mumbai, 16 May 2008. * 1. *  *  Background and present status  1.1 The rapid advancement of innovative payment systems we experience today is a part of the financial system infrastructure in most countries. In both wholesale and retail areas, new technologies, participants and alliances have emerged, transforming the payment systems landscape. This transformation has blurred the distinction between large value and retail transactions, and also the payment instruments used for such transactions. Often, we find that large value payments are made through cheques, while electronic payments are used for small value retail transactions. Although banks have been in the forefront of promoting some payment instruments, such as credit cards and electronic payments, and the related infrastructure, by and large, the wider payment reforms have been initiated by central banks. 1.2 The retail payment mechanisms, some of which are also systemically important, have been evolving over the past few decades. However, the progress has been slow. Given the demand for integration of retail payments with high value payments, domestic as well as international, pressures are building up to reform the retail payment systems. Accordingly, the increased availability of convenient retail payment instruments at reasonable and competitive prices has changed the individual payments behaviour and patterns.

1.3 In spite of these changes, a notable difference between high value and retail payment systems is that the high value payments have become customer-centric, while the retail payment systems have had limited success in securing customer centricity. Crossborder retail payment systems are also fragmented. Compared to high value payment systems, retail payment development is evolutionary and not revolutionary. 1.4 In general, users expect the payment system to possess three fundamental characteristics. First, it must have integrity, i.e. transactions must be safe, reliable and secure. Second, it must be competitive and efficient, i.e. the cost of making payments should be as low as possible. Third, it must be accessible and inclusive, i.e. available to all and include all. 1.5 As long as people see one or two of the above characteristics and accessibility, in particular, they are comfortable and do not clamour for major changes. This complacent  BIS Review 61/2008  1  attitude is a common challenge in retail payment reforms. People are also not too worried about the systemic risks or payment system crashes and their impacts on the wider financial system. Hence, there is no pressure for change from users although, from the policy makers’ point of view, there are many risks. In this context, while preserving public preference for accessibility, the regulators and policy makers need to provide the policy and regulatory framework, while the private sector should capture critical mass by introducing new payment methods and instruments; promoting widespread access to such instruments; and removing any impediments to accessibility.