The Importance of the Payments Systems in A Modern Economy
“Without secure payment systems, you cannot have a modern economy or a functioning Internal Market.”
Frits Bolkestein
~~Adz:Left~~What Is A Payments System and Why Is It Important?
No matter what your view on life, it takes money to help you achieve your dreams and visions. Cash flow is perhaps the number one thing that influence the quality of life experienced by individuals, households and nations. The Payments System is what helps to circulate money throughout the modern economy ensuring that the providers of goods and services are able to easily obtain commercial value in exchange for their efforts.
The Payments System can be viewed as similar to the Circulatory System that serves to transport blood throughout the human body. Just as a deficiency in the supply or quality of blood will impair the quality of life, money has to flow freely to keep the economy performing at optimum levels and eliminate risks from disruptions, disorders, and possible contagion. Blood needs a healthy circulatory system to pass through. Money needs an efficient payment clearing and settlement system to accommodate the flow of commercial value resulting from financial transactions. The end result of an efficient Payment System is businesses receiving payment for goods and services, and consumers being able to make house purchases, receive salaries and benefits, and pay for goods and services with ease.
The concept of Payments System covers the payment instruments, the institutional and organizational structures, the operational procedures and the communication network that facilitates the exchange of financial resources between businesses and individuals. The main payment instruments include, cash, cheque, wire transfers and debit and credit cards while the infrastructure includes legislations, Automated Teller Machines (ATM) terminals, Point of Sale (POS) terminals, Reserve Transfer Systems, and a centralized process for financial institutions - usually commercial banks - to settle non-cash financial transactions.
An efficient Payments System encourages competition in the supply of payment services so as to provide a range of convenient and low-cost payment methods. A jurisdiction that provides a stable payment system, that is cost competitive and fully integrated into the international financial system, can provide a safe haven for funds held for transactions purposes and therefore prove attractive to corporate financial officers seeking to optimize their asset management strategy.
The Information and Communication Technology (ICT) infrastructure across the ECCU provides a platform on which to build a first class Payments System that can enhance the financial sector’s international and global appeal, which would enhance the region’s competitiveness and bid for a larger share of global financial markets transactions with the potential to impact the pace of economic development across the region.
This article was submitted by the Eastern Caribbean Institute of Banking and Financial Services (ECIB) , as part of the activities commemorating Financial Literacy Month, October 2007, an initiative coordinated by the ECCB. Financial Literacy Month October 2007 – Save For Your Future.
