Prospects and outlook, therefore, for Asian region trade, and consequently retail payments, are good. 3  Transforming challenges to new opportunities  3.1 Challenges and complexities: Retail payments development is very challenging due to numerous complexities and is much more difficult to modernize than large value  2  BIS Review 61/2008  payments. In order to complete even a small payment, it is necessary to have appropriate and acceptable payment instruments, an institutional set up, an enabling legal environment, infrastructure, processing procedures and money/fund transfer mechanisms. There are enough opportunities to change this situation, if all stakeholders are committed to introducing innovations, with appropriate safeguards. We need to look at some of the practical ways of starting this transformation. 3.2 Discourage cash and paper-based instruments: Progress in the use of electronic payments has been slow in our region due to numerous reasons. Cash is the most popular mode of face-to-face payments for retail transactions. Cash does not require the user to go to specific places, use computers or special equipment to originate or settle a transaction. Moreover, the payment is final. Given the user preference and convenience, cash and cheques still dominate as payment instruments in many countries. Businesses also prefer cheques because of inherited cash management processes, legacy of accounting systems or reluctance by their governments to transact in electronic payment instruments. If there are cheque clearing delays or frequent cheque returns, small businesses have no choice but to borrow for short periods, perhaps at exorbitant interest rates, from informal sources.

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.