Retail electronic money and prepaid payment instruments

26 Apr

The thesis describes the concept of retail electronic money (also referred to as stored value), provides a brief evolutionary overview of prepaid electronic payment instruments, and tries to reconstruct the development process of the new payment methods. Four types of schemes that exist in the EU and the USA—multipurpose prepaid cards, prepaid dedicated accounts, person‑to‑person online payment services and mobile customer accounts—are described. Subsequently, an overview of current trends and future prospects is presented. In a more theoretical manner, the development of prepaid schemes is put into the broader perspective of the evolution of payment systems in general, and the process of innovation. Based on that, several conceptual barriers to their adoption are suggested. Finally, regulatory environments in the EU and the USA are described and compared. The thesis aims to analyze the current and potential trends and their implications for payment systems.

Retail electronic money and prepaid payment instruments
Title: Retail electronic money and prepaid payment instruments (1730 clicks)
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Graphic outline

Basic framework and definitions


Definition of payment

Means of payment

Payment instrument

Electronic payment

Definition of electronic payment

Wholesale and retail payment systems

Systemic threats stemming from distinctive features of e-payments

Electronic money and stored value products

Definition of electronic money

Multipurpose prepaid cards and network-based products

“Second wave” paradigm shift

Mobile payments

Definition and classification of m-payment schemes

M-payment provider participation models

Mobile authentication solutions

Traditional and new payment instruments

Selection criteria and corresponding payment instruments

Motivation behind the criteria selection

Selection criteria

Corresponding instruments

Multipurpose prepaid cards

Electronic purses

Prepaid debit cards

Prepaid dedicated accounts

Person-to-person online payment services

Mobile customer accounts

Mobile virtual accounts

Prepaid airtime accounts

Recent trends and future prospects

Electronic purses

Prepaid debit cards

Prepaid dedicated accounts

Vouchers as a transitory solution

Micro-payments for digital content

Person-to-person online payment services

Online auctions

Cross-border payments

Potential barriers to growth of P2Ps

Future prospects of P2Ps

Mobile customer accounts

M-payments’ value proposition

M-commerce and prepaid principle

Dominant m-payment transaction models

Changing role of telecoms

Common platforms and standards in m-payment

Current m-payment applications

Future prospects of m-payments

Transition to innovative payment instruments

Innovative features of e-money in the perspective of payment systems evolution

“Gloomy scenery”

Barriers to adoption of innovative payment instruments

Network effect

Effect of convenience goods

Comfort factor

Effect of discontinuous innovations


Outlook of payment systems innovation

Regulation of e-money and stored value products

General overview of policy and regulatory issues related to the retail payment systems development

Policy debates

Systemic considerations

Need for new regulatory models

Finding the relevant legislation

E-money regulation in the EU

Early history of e-money regulatory considerations in the EU

E-money Directives

Implementation of the E-money Directives

Functional approach

Physical possession approach

New Legal Framework for Payments in the Internal Market

E-money regulation in the USA

Multiple layers of payment services regulation in the USA

State money transmitter laws

State banking laws

Anti-money laundering legislation

Federal Reserve’s responsibility for the payment system

Regulation E

FDIC Insurance

Uniform Money Services Act

Monetary value

Stored value

Money transmission

Implementation of the UMSA

ELMI Directive and UMSA comparison

Regulatory aspects of payment systems innovation

Implementation of the unified law

Perception of “e-money”

Non-bank institutions provisions

Note about P2Ps regulation

P2Ps regulation in the USA

P2Ps regulation in the EU

Note about m-payment regulation





Table 3.1 Classification of payment instruments/means of payment
Table 6.1 Main features of various card schemes
Table 7.1 The FSA guidance on the scope of e money regulation
Table 10.1 Credit card use for online purchases by region in 1999
Table 10.2 How top 25 online merchants are paid/would prefer to be paid
Table 10.3 Factors discouraging USA consumers from using a credit card online
Table 10.4 U.S. consumers’ concerns over online & offline card fraud
Table 10.5 Relative importance of cashless payment instruments
Table 10.6 Relative importance of cashless payment instruments
Table 10.7 How U.S. consumers made in store payments
Table 10.8 Indicators of use of various cashless payment instruments: volume of transactions ( USA)
Table 10.9 Indicators of use of various cashless payment instruments: value of transactions ( USA)
Table 10.10 Consumer payment media used at the POS
Table 10.11 Comparison of payment methods
Table 10.12 Cross border retail payments in 1998
Table 10.13 Prepaid subscribers in world regions (2001–2004)
Table 10.14 Micro and macro payment estimates (2000–2005)

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