The debit card should be positioned as a cost-effective payment card to make it more affordable for small merchants to accept card payments. The expansion of the POS network would allow for wider acceptance of the debit card to be used more pervasively, to displace the use of cash, thus bringing about cost savings for the country in the long run. To correct the distortions and promote competition in the domestic payment card market, a Payment Card Reform is certainly timely to stem the indiscriminate increases in interchange fees and correct the price signals with the view to widen the POS network especially in non-traditional industries and rural areas. 2. Development and sharing of infrastructure investment  To be successful, e-payment solutions must not only be affordable, their expansion must also be sustainable in the long term. Sustainability entails the ability to leverage on an enlarged network which enables market players to build critical mass and achieve the desired economies of scale. In this regard, the importance of collective industry efforts to develop and share infrastructure cannot be emphasised enough. Infrastructure development is very expensive and the banking industry ought to share the required investments. Infrastructure should not be used as a competitive tool but rather as an enabler that would promote modernisation of the payment system. Besides minimising cost and lowering the entry barrier for new players, collective infrastructure development and sharing of infrastructure costs would allow market players to compete directly on product offerings and quality of services, thus providing better value to consumers.

On the one hand, the banks themselves may be encouraged to take on excessive risks; while, on the other, depositors may be encouraged to ignore risk and to become literally care-less as to where they place their BIS Review 13/1997  -3-  deposits. So, both the safety and soundness of the banking system, and its competitive efficiency, and that of the financial system more generally, may be undermined. Central banks’ macro-prudential concerns for the stability of the banking system have necessarily meant that they have taken a close interest in the risk characteristics of individual banks as the component parts of the system. But more recently (at least in the UK with the coming into force of the first Banking Act in 1979) individual banks were brought under formal banking supervision for the first time, and non-bank depositors provided with limited deposit insurance. Such micro-prudential supervision of each individual bank, of course, also helps to reduce the risk of instability in the system as a whole, and even limited deposit protection may reduce the risk of bank runs, at least in the form of the sudden withdrawal of retail deposits. This, too, of course, can give rise to moral hazard problems if it is perceived as tantamount to a guarantee. But micro-prudential supervision and deposit insurance were introduced in the UK at least (though not in the US) with the distinct, social, purpose of providing individual, small, depositors with a degree of protection against the sudden loss of their principal liquid asset holdings.