The optimal mix depends on the level of development of the financial market, but a more active role has to be played by the authorities to achieve the public policy objectives of retail payment reforms. 4.3  Policy elements  4.3.1 Central banks to play a catalytic role: Central banks should be at the centre, take the leadership and coordinate the development process as other stakeholders tend to have vested interests. While it is important to enhance oversight and supervisory functions by the central banks and ensure that governance arrangements for infrastructure and service providers are in place, it is also necessary to ensure that such arrangements do not lead to unnecessary restrictions on competition and innovation. 4.3.2 Stakeholder participation: It is essential that central banks engage in effective participation and secure cooperation from all stakeholders in the payment systems, through establishing National Payment Councils (NPC) or National Payment Committees/Advisory Councils etc. India, Sri Lanka, Pakistan and some others have already established NPCs and they are the highest level policy making authorities for development of national payment systems. Banks have a good opportunity to give their inputs at these meetings, especially on operational matters. 4.3.3 Declare public policy objectives of retail payment system development: The undeclared and unsaid public policy objectives have been a contributory factor for ad hoc retail payment system developments in the past.
Efforts are now being made by some countries such as the Philippines and Eastern European countries to involve governments in retail payment development by diverting revenue receipts from income tax, custom duties and other income sources through modern retail payment instruments. iv. Establish confidence in payments media: Either the service providers, the regulators or consumer protection authorities, or all of them jointly, should ensure that new products are safe and efficient and that they have public confidence in them. Pushing efficiency too far could adversely affect public confidence in payment instruments. For example, moving aggressively into credit cards, which are considered to be efficient and safe payment instruments, has also resulted in numerous frauds and risks, and this has begun to scare people. New technologies break physical distance barriers enabling efficient real time transactions, but the critical factor is network security, which should ensure access only to a person’s own funds. New delivery channels for retail payments such as the Internet, on-line personal payments, electronic bill presentments, telephone, e-cheques or e-invoices are becoming popular, although they do not always assure the same level of security as some of the other products. Tamperproof cards are generally considered to be safeguard against credit card frauds, but the relevant software appears to be expensive. Financial intermediaries are not keen to invest in such safeguards. Even if they do, they will pass on the costs to customers, which will defeat the affordability purpose.