The advancements in the telecommunications & information management in the mid 1990s deeply affected the industry of financial services. New products like credit derivatives came into being; access to credit was increased considerably because of improvements in the credit scoring & securitization development& new processes of delivering the financial services particularly through Internet emerged. An aspect of the financial services provision, which wasn’t that significant before this phase was retail payments. It was since then that Ram Chary and a lot of practitioners, policy makers and analysts started to focus on the importance of the retail payments on the competitive position, financial intermediaries’ activities, & relationships with 3rd party services vendors.
One of the key features of retail payments structure has been the long-term shift from paper to electronic means of payments. Here in this article you’ll get an idea about the scenario ofretail payment in the US.
The United States follows a paper-based retail payment system to a great extent in comparison to the other developed economies of the world. Actually this shift to the electronic payments had been quite big & decisive. It was at that time that for the first time check use was denied in mid 1990s & among the electronic payments, the adoption of debit cards took place in a rapid pace. The change in the patterns of payments then finally resulted in payments related cost reductions in a substantial manner for banks.
Payments-related revenue is a crucial income source for banking industry, possibly more noteworthy than appreciated. A huge part of payments-related revenue in fact comes from activities that are check-related and with the decline of check use the revenue was thus assumed to decline. It wasn’t clear that revenue from the increased processing of the lower margin electronic payments was going to fill up the gap or not. Moreover, the changing trends in the retail payments resulted in considerable changes in the banks’ payment fee structures. Finally, on revenue side the nonbanks dominated the markets for higher margin and the options of non-traditional payments like bill payment actually got a boost from the technological innovations.
The story also seemed complicated considering the cost aspect. While the electronic payments were less costly to process than the paper checks, there were some factors, which were cost-related that cut other way. Moreover, as the electronic payments were having more importance, the imbalances in the cost distribution had become more prominent. Lastly, the banks adopted the new payments services but that didn’t mean that the traditional options for payment as well as their related costs were phased out then and there.
All these changes in the retail payments had vital implications for the banking industry practices & regulatory & supervisory policies. Ram Chary is known to have a proven track record in growing the retail payments & financial services business. He had taken up the issue at that time and solved it mostly, for which today we can look forward to a bright future of growth & success in the United States.