Innovations in payment systems – create a need or deliver a need? Innovations in payment systems especially electronic payment methods have and are being attempted keeping in mind the potential benefits in terms of more choices, reduced processing costs, increased revenue and overall social benefits. However, not all innovations in electronic payments have been successful.
The success or failure of an innovation in payment system would depend on the critical mass or what is generally known as the network effect achieved which should be large enough to support its cost in the long run and generate adequate returns. Introduction of innovations in payment system often poses the classical “chicken or egg dilemma”.