CHAPTER II
REVIEW OF RELATED LITERATURE AND STUDY
2.1 Review of Related Literature
2.1.1 Local Literature
According to Mario B. Lamberte (Nov. 2001) from Philippine Institute for Development Studies said in his study that 'in a present economy, the payment system is a major factor of the country's structure system. Truly, no country today can provide to take its payment system for approved. The innovation towards the field of information technology is now uprising particularly in the payment transaction. Trough using the strategy of e-commerce now in the normal of economic activities. So that, the changes in the process of payment is now arise. Otherwise, the Philippines is now moving forward trough using 'Automated Payment Process''
Through the years, payment systems have considerably changed as forms of payment have changed from precious metals to currency and checks and recently to electronic payments. These changes have been made because of the need to facilitate huge transactions arising in fast growing and increasingly more sophisticated economies. Customers naturally seek the most effective payment technique, while providers of payment services usually seek the most profitable payments system. Advances in information technology and changes in laws, institutions and guidelines in some countries have encouraged the development of new payment instruments as well as the distribution and processing arrangements for small and large value, time-critical payments. With e-commerce now in the mainstream of economic activities, we can therefore expect more 3 major changes in the payment systems worldwide in the next five years than we have in the last five decades. Obviously, the Philippines cannot escape from this sea change.
Developments in the payment system have implications for the conduct of monetary policy. The second to the last section of this paper, therefore, deals with this issue. In particular, it discusses specific payment system innovations, such as the switch to RTGS system and use of electronic payments media that can improve or lessen the effectiveness of traditional monetary tools. Lastly, the section presents some recommendations.
2.1.2 Foreign Literature
According to Joseph t. Sinclair and Ron Ubels of eBay Global ' if you conduct eBay business abroad, the means of payment are more risky than in the US. Certainly payments in the US have their problems, but we hope only occasionally. Payments abroad are even less secure, and you're bound to have more problems, unless you strive for safety. That means safety not only for yourself but for the other party too, whether that party is a buyer or a supplier.'
A seller wants to get paid. In a consumer sale, the buyer pays in advance, and this lessens the sellers' risk, although there is always the risk of a charge-back should the buyer pay by credit card.
Most eBay businesses will not find themselves in the business of exporting in bulk to another party. If they export in bulk, it will be to a warehouse (i.e., no payment to be collected until subsequent consumer sales are made) or to a joint venture who is essentially a partner.
The relationship with joint ventures can be almost anything from an importer with whom you do recurring business or in a joint venture. For the former, you need to be careful about collecting payments. For the latter, the financial arrangements, you might have a hybrid situation.
buyer is naturally hesitant to repay for orders abroad because of the additional risk in transportation, customs clearance and obtaining a remedy for a breach of contract. A buyer would rather pay after the receipt of the goods.
A seller needs to deliver the goods. That is, a seller has more concern about delivery abroad than domestically because often the transportation distances are greater with a greater likelihood of multiple carriers. If the goods are not delivered, the seller is likely a absorb the loss in eBay consumer transactions–remember the feedback system? That is, the seller won't get paid. In non-consumer transactions, the seller is also unlikely to get paid.
The goods have to arrive undamaged in a timely manner. Damaged goods, goods that arrive two months late, or disappearing (stoles) goods may affect a sellers receipts of payment.
Ship and forget is not a reliable option globally. It may work domestically, although many eBay sellers prudently obtain proof of receipt routinely for domestic sales. For sales abroad proof of delivery is essential due o the additional risk of doing business at long distances with buyers in other countries. This is not a problem as couriers and most carriers have a tracking system for packages which require a receipt upon delivery.
If there is one dimension to your online selling that you do not want to have a problem with, it is getting paid. There are a number of payment choices that can provide a bit of security between you as seller and your buyer. Nothing is foolproof, however, and you will need to weigh the risks and benefits for your individual business. One of the available options is to use third-party payers who can facilitate your buyers, paying you with certified checks. At the other end of the continuum is the strategy of establishing merchant accounts with banks that can process credit card payments. Perhaps the best known payment system, thanks to the phenomenon of eBay, is PayPal. Begun as an independent company, it has since been acquired by eBay and is used for buying and selling transactions on that site. Their merchant accounts, however, do not have to be used solely for eBay. In all cases, there is a risk of not getting paid. Or there can be glitches with too many or too few funds going in or out of your account.
Naturally there is some cost associated with using a third party collect payment for you. These are expenses that fall to your bottom line. It is worth investing which merchant account providers are out there and which one best matches your particular needs. See if there is any flexibility I the fees and discount rate. Feel free to ask to see a sample monthly statement. Find out if there services include reports such as order analysis, which can be very useful in tracking your products and the seasonality of your business. You definitely want a highly competent and respected service for this function. Even if the best of the best seem to be vulnerable to hackers however, so be sure to negotiate an agreement that protects you as much as possible in the event of fraud. It will be important to reassure visitors' and prospective customers on your site that their credit card information will be protected. It may be tempting to seek details about the buyer for demographic profiling, but probing too far can make folks skittish.
Taking credit cards for payment may require special hardware as well s software. Find out if there is a minimum or maximum threshold or transactions as part of your package of service. Depending on how many transactions you anticipate it may be more advantageous to have real-time rather than batch processing.
If may be worth comparing each company bundle of merchant services, including dispute resolution services and transaction screening. When reviewing merchant payment systems be sure to consider other charges, such as set-up, monthly, gateway and transaction fees. Inquire whether there would be any fees associated with fraud protection. Your buyers' identities and personal information have to be secure in whichever system you select. Probe to discover how this is assured. Once you have the facts. You certainly want to research the reputation and reliability of the company. Money is still real in the virtual world. All of the responsibilities for managing it are there with perhaps some added challenges. This one area you absolutely have to get right in order to succeed.
2.2 Review of Related Study
2.2.1 Local Study
2.2.2 Foreign Study
According to David Sheppard, payment systems come in many procedures, but their purpose is always the same – specifically, to allow people to transfer moneys from an account at one bank to an account at another bank. The substitute for the client and the receiver would be to settle their transaction either using cash or by trade. Banks themselves also use payment systems to transfer funds as a result of their own transactions (as distinct from their customers'). Whatever its particular form, a payment system can be seen as containing three main elements or processes:
' A means of approving and introducing the payment i.e. the means by which the client gives authority to his bank for funds to be transferred.
' A means of transferring and switching the payment instruction between the banks involved – usually referred to as payment.
' A means of settlement between the banks involved – i.e. the client's bank has to compensate the receiver's bank, either by agreement or through accounts that the banks hold at a third-party settlement agent, usually (but not always) the central bank.
This Handbook reflects these procedures in more detail, and in particular the risks and policy issues that they present. A repeated theme is that, though there are a number of common risks and problems to be addressed, there is no particular ideal way of addressing them. Solutions adopted in one country may not necessarily be appropriate in another. Another significant message is that, in increasing a new payment system or modifying an existing one, the emphasis must be on contract and co-operation – both between central bank and commercial banks as the operators of the system, and between the system operators and its customers.
Foreign Study
Based on Thorsten Koeppl, Cyril Monnet and TheodosiosTemzelides (A Dynamic Model of the Payment System) they studied about the design of effective inter-temporal payment preparations when the ability of agents to perform certain welfare-improving transactions is subject to random and unobservable tremors. Efficiency is achieved via a payment system that assigns balances to members, adjusts them based on the histories of transactions, and periodically resets them through payment. Our analysis talks two key issues in the design of actual payment systems. First, efficient use of information requires that agents play a part in transactions that do not involve monitoring frictions subsidize those that are subject to such contacts. Second, the payment system should discover the trade-off between higher liquidity costs from payment and the need to offer inter-temporal incentives. In order to counter a higher exposure to default, an increase in payment costs implies that the capacity of transactions must decrease, but also that the frequency of settlement must increase.
Most models of decentralized exchange abstract from the institutions that enable such exchange and, hence, from their efficient design. This is in sharp contrast to the immense volume of transactions that are facilitated through payment systems in modern economies. Lacker and Weinberg (2003) and more just Kahn and Roberds (2006) argue, therefore, that studying payment systems, and more approximately payment economics, is essential for understanding decentralized exchange and for designing institutions that can support it efficiently. However, they also point to the lack of a short and combined framework that can guide policymakers in the efficient design of such a system. The challenge is twofold. On the one hand, such a framework requires a modelling of the fundamental reasons why a payment system (PS) is necessary; on the other hand, answering questions about the efficient design of such systems requires a general welfare analysis. The goal of this paper is to address these challenges. We build a dynamic general equilibrium environment in which transactions are subject to a private information friction. To have an explicit role for transactions, we incorporate a standard search model into our framework. In the spirit of search models, the random matching shocks that agents are subject to are a tractable way of modelling random needs for liquidity. This is an important feature of actual PS in which participants are subject to random needs for making payments to one another. Moreover, the model is consistent with the fact that actual transactions are bilateral and, frequently, subject to private information. For example, within a retail PS, a consumer's ability to make a credit card payment might not be observable. Similarly, within a wholesale system, banks might have private information about the necessity of making certain payments. Time, t, is discrete and measured over the natural numbers.
An allocation for the above environment specifies the quantity produced and consumed during bilateral transactions, as well as the production and consumption of the general good for each agent during settlement. In general, allocations may well exhibit history-dependence. In this paper we concentrate on whether efficient allocations can be decentralized through a payment system (PS). A PS keeps a record of past transactions by assigning balances to its participants. In addition, the PS instructs participants to produce or consume certain quantities in trade meetings and specifies rules for how the balances are updated given the participants current transactions.
Foreign Study
Stephanie Bolt, David Emery and Paul Harrigan made a research about 'Fast Retail Payment Systems' Last December 2, 2014,a consortium of Australian financial institutions proclaimed that they had committed to funding the building and operation of infrastructure that will support a new fast retail payment system. The new system, stated to as the New Payments Platform (NPP), will be a landmark change for the Australian payments system, bringing not just proximity of retail payments, but a range of other advances that will improve accessibility for consumers and provide possibly significant efficiency gains for businesses. The NPP is scheduled to be operational in 2017. This development in Australia has not occurred in isolation. A number of other countries have applied similar systems in recent years and many others now have such projects under concern. This evolving trend provided a backdrop for the Reserve Bank's Strategic Review of Innovation in the Payments System, which was a catalyst for the current project (RBA 2012). This article examines key features of the fast retail payment systems that have been developed around the world, providing some context for the development of the NPP in Australia.
In the Strategic Review of Innovation in the Payments System: Decisions, released in June 2012, the Reserve Bank's Payments System Board (PSB) noted that some customer-facing improvements had benefited financial institutions and their customers. However, it also noted that market forces might not be enough to produce some improvements that are in the public interest, particularly those requiring collective effort to succeed (RBA 2012). To address these concerns, and distinguishing trends internationally, the PSB set out a number of 'strategic objectives' that included the ability for business and consumers to make and receive real-time retail payments. Other planned objectives included the ability to: make and receive payments outside normal banking hours; send more explanatory information with a payment; and send payments without having to use full Bank State Branch (BSB) and account number details.
Fast retail payments can be thought of as payments that are available for use by the recipient a short time after the payment has been initiated by the sender ' within minutes, or indeed seconds. This differences with many recognized retail payment systems that rely on group processing where funds are made available. In Australia, bank identifier codes are known as 'BSB numbers'; in other countries these are called bank codes, transit numbers and sort codes. 3 The Federal Reserve Banks showed an assessment of international fast retail payment systems to identify potential options for improving the speed of payment systems in the United States (The Federal Reserve Banks 2014a). On the next business day, or even several days later ' mostly in the case of cheques.