Electronic Payment Systems in Developing Countries for Improved Governance System

Introduction

Electronic commerce and its related services over the Internet could be the engines that improve economic well-being of a nation through liberalization of local services, rapid integration into globalization, and leap-frogging through evolved technology. As electronic commerce, from its very inception, integrates the domestic and global markets by negotiating on trade issues in more elaborated ways, it demand re-investigation of key domestic policies, specifically in telecommunications, financial systems, and distribution and delivery mechanisms of a nation. These sectors are considered as intrinsic factors to the development of a modern economy. Liberalization of policies will rebound to greater economic welfare than restriction in more narrowly focused sectors. Thus, the e-commerce wave can act as a powerful force to erode domestic barriers that have slowed the liberalization of this sector in many countries (Mann, 2000)

Among various aspects of electronic commerce, its operational complexity and inherited characteristics of network externalities are the two prime features that are hindering its implementation. More specifically, the complexities of negotiations require cooperative efforts among operators inside and outside their countries through national and regional platforms. These processes demand policy upgradation at the local level, including the regional contexts, such as following WTO charters. Secondly, by nature, electronic commerce is characterized by network externalities and developing countries rather by not taking advantage of the technical leadership coming out of the private sector are mostly lagging behind. In this respect, Mann (2000) indicated that network externalities and interoperable standards are key in maximizing the benefits of e-commerce. Moreover, developing countries should not try to develop domestic standards. Adopting the old technique of import substitution to develop a domestic industry is even more economically wasteful in the context of the Internet and electronic commerce. They would be benefited more, if they could localize the globally available successful policies, rules and techniques fitting into their national contexts.

However, development of e-commerce in developing countries is not only restricted by local policy and financial laws, but also compounded by many visible and invisible impediments; such as infrastructure, consumers’ habit, local culture, trust, awareness, security, and many other issues. The situation aggravates further, when specific issues on electronic payment systems come into focus for enhancing economic activities of developing nations to foster their economic growth.

The electronic payments networks that are available in many countries, are created mainly by the initiatives of private entrepreneurs, such as the issuing and acquiring agencies of corporate debit/credit card systems. In fact, these are ever innovative systems, which connect buyers, sellers, the banking system and other specialized operators like, card issuers and processors. However, the evolution of such networks demands better technologies to offer growing efficiency and security, convenience and value creation, consumer empowerment and greater transparency in the fees, including standardization and regulation (Hnatyuk, Marur & Patrzalek, 2001; Mazzi, 2006).