Efforts are now being made by some countries such as the Philippines and Eastern European countries to involve governments in retail payment development by diverting revenue receipts from income tax, custom duties and other income sources through modern retail payment instruments. iv. Establish confidence in payments media: Either the service providers, the regulators or consumer protection authorities, or all of them jointly, should ensure that new products are safe and efficient and that they have public confidence in them. Pushing efficiency too far could adversely affect public confidence in payment instruments. For example, moving aggressively into credit cards, which are considered to be efficient and safe payment instruments, has also resulted in numerous frauds and risks, and this has begun to scare people. New technologies break physical distance barriers enabling efficient real time transactions, but the critical factor is network security, which should ensure access only to a person’s own funds. New delivery channels for retail payments such as the Internet, on-line personal payments, electronic bill presentments, telephone, e-cheques or e-invoices are becoming popular, although they do not always assure the same level of security as some of the other products. Tamperproof cards are generally considered to be safeguard against credit card frauds, but the relevant software appears to be expensive. Financial intermediaries are not keen to invest in such safeguards. Even if they do, they will pass on the costs to customers, which will defeat the affordability purpose.

They also prefer cheques as they can make late payments through post-dated cheques and other deferred instruments. A payment through a cheque is not final and the availability of funds to the payee takes days. Cheques carry considerable credit risk and the payment can be assured only with a cheque guarantee scheme. Although cheque returns is considered a criminal offence, banks in many countries are reluctant to take appropriate steps to deal with cheque returns, due to fear of recovery of loans and advances from customers. 3.3 Automation of cheque clearing: The cheque clearing process and its modernization have been taking place in many countries. Asia, Singapore, India and Sri Lanka have changed their existing laws and introduced cheque imaging and truncation systems, which have changed the whole process of cheque clearing and reduced processing time and transportation costs. The Sri Lankan experience shows that banks modernized their backoffice systems to accept electronically presented cheque information and link branches to the central cheque clearing center at LankaClear to provide end-to-end cheque processing, by crediting the proceeds to customers’ accounts on t+1 or t+2. This has had a significant impact in the rural and outstation areas in Sri Lanka, where businesses waited for 7 days or more to get cheques cleared. The system has also helped to reduce geographical barriers between regions and districts. Small businesses have begun to roll over finances better and faster. However, although it is advantageous to customers, the inefficiencies inbuilt in paperbased instruments continue to remain.