OVERVIEW:

PAYMENT
SYSTEM
G I N A LY N A . S A R M I E N T O - D A D I S , C PA
INTRODUCTION

Money facilitates transaction in the economy

Payment System is the mechanism form conducting
these transactions
It has evolved from payment made in gold or silver
coins, to paper currency, to checks, and now in
electronic fund transfers
COMMODITY TO FIAT MONEY

Commodity Money
- refers to a good used as money that has value
independent of its use as money

Fiat Money
- Refers to money, such as paper currency tat has no
value apart from its use as money
COMMODITY TO FIAT MONEY

Bangko Sentral ng Pilipinas (BSP)

- Issues paper currency
- BSP payment system is a fiat money system
- Has a legal monopoly on the right to issue currency
IMPORTANCE OF CHECKS

Checks
- Innovation that were introduced in the early 20th
century
- These are promises to pay on demand money deposited
with a bank or other financial institution
- Can be written for any amount and can be used to settle
transactions
IMPORTANCE OF CHECKS

Use of Checks
- Requires more steps that settling transactions with
currency
- Information costs are incurred in using checks as there
is a need for the bank to verify whether the issuer has
sufficient balance in his account
- Trust requires on the part of the seller
NEW TECHNOLOGY
& PAYMENT SYSTEM

Desirable Outcomes for a Payment System

1. Security – better security increases consumers’ and

businesses’ confidence that funds will not be stolen
electronically (e.g. hacking)
2. Efficiency – instead of processing paper checks, time and
resources are diverted to other activities, thus increases
process efficiency and utilizes fewer workers or computers
NEW TECHNOLOGY
& PAYMENT SYSTEM

Desirable Outcomes for a Payment System

3. Speed – fast settlement of payments facilitates

transactions by both households and businesses
4. Smooth International Transactions – the increasing
amount of business that takes place across borders can be
facilitated if payments can be made quickly and
conveniently
NEW TECHNOLOGY
& PAYMENT SYSTEM

Desirable Outcomes for a Payment System

5. Effective collaboration among participants in the

system – the payments system needs to efficiently involve
governments, financial firms such as banks, and other
businesses around the world. Such involvement ensures
smooth transfers of funds in transactions.
NEW TECHNOLOGY
& PAYMENT SYSTEM

Debit Cards
- Can be used like checks
- Commonly used in super markets and retails stores.
- Once used, the depositor’s account will be debited by
the bank and credited to the store account.
NEW TECHNOLOGY
& PAYMENT SYSTEM

Proximity Mobile Payments

- Recent development is the apps that are connected to
the debit or credit cards
- E.g. Apple Pay, Android Pay,
NEW TECHNOLOGY
& PAYMENT SYSTEM

Automated Clearing House (ACH)

- This include direct deposit of payroll and electronic
payment for purchases of material transactions such as
cars, laptops, etc.
- It reduces the likelihood of missed payments on the
buyer side, and reduce communication costs on the
lenders part
NEW TECHNOLOGY
& PAYMENT SYSTEM

Automated Teller Machines (ATMs)

- Allows to carry out bank transactions even though
beyond banking hours such as withdrawals, bank
transfer, bills payments, and deposits
- It can be used also to transact to ATM machines other
than your bank account. It made possible due to
connected networks (BANCNET, Megalink)
E-MONEY, BITCOIN & BLOCKCHAIN

E-MONEY
- People are now using digital cash to buy goods and
services as well as use for electronic fund transfers
- Example: PayPal, Gcash, PayMaya
- Central Bank does not control this, though, so it is
essentially a private payments system
E-MONEY, BITCOIN & BLOCKCHAIN

BITCOIN
- Not owned by a firm is instead the product of a
decentralized system of linked computers
- Produced by people performing complicated
calculations necessary to ensure that online purchases
made with bitcoins are legitimate – that is, that someone
doesn’t try to spend the same bitcoin multiple times
E-MONEY, BITCOIN & BLOCKCHAIN

BITCOIN
- People can buy and sell bitcoins (cryptocurrency) in
exchange for dollars and other currencies on web sites
and can be stored in “digital wallet”
- The purchases can be processed thru an app –
commonly used is BitPay (based in Atlanta) which is
similar to credit car payment.
E-MONEY, BITCOIN & BLOCKCHAIN

BLOCKCHAIN
- Technology used in bitcoin that has attracted from both
firms and governments as they attempt to increase the
speed, efficiency, and security of the payments system.
- This is a distributed ledger, or an online network that
registers ownership of funds, securities, or any other
food, including movies and songs.
E-MONEY, BITCOIN & BLOCKCHAIN

BLOCKCHAIN
- is a shared, immutable ledger that facilitates the process
of recording transactions and tracking assets in a
business network.
- An asset can be tangible (a house, car, cash, land) or
intangible (intellectual property, patents, copyrights,
branding).
E-MONEY, BITCOIN & BLOCKCHAIN
BLOCKCHAIN: IMPORTANCE
- ideal for delivering that information because it provides
immediate, shared and completely transparent information
stored on an immutable ledger that can be accessed only by
permissioned network members.
- It can track orders, payments, accounts, production and much
more.
- And because members share a single view of the truth, you can
see all details of a transaction end-to-end, giving you greater
confidence, as well as new efficiencies and opportunities.
E-MONEY, BITCOIN & BLOCKCHAIN
BLOCKCHAIN
- Industries using this technology:
Supply Chain Oil and Gas
Health Care Telecommunications
Government Insurance
Retail Financial Services
Media and Advertising Travel and Transportation
E-MONEY, BITCOIN & BLOCKCHAIN
BLOCKCHAIN: ELEMENTS
E-MONEY, BITCOIN & BLOCKCHAIN
 E-MONEY, BITCOIN & BLOCKCHAIN

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CASHLESS SOCIETY

Federal Reserve study found that noncash payments

continue to increase.
Electronic payments now made up of more than 2/3 of all
noncash payments
Number of checks written has been dropping by more
than 2B per year
CASHLESS SOCIETY

However, this is still difficult to attain due to:

1. Infrastructure for an e-payments system is expensive just
like blockchain
2. Worry of the users on the data privacy that their personal
information may be used by hackers.