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A Survey and Risk Analysis of Selected Non-Bank Retail Payments Systems


  • Nikil Chande


Payment services offered by non-banks have flourished in recent years. The author provides an overview of the different kinds of non-bank retail payments schemes currently available in Canada, illustrating each by focusing on a specific example. Current players in the Canadian marketplace include electronic bill consolidators, such as epost; online payment providers, like PayPal; and pre-funded schemes, such as retailers’ gift cards. The author also discusses the main risks associated with each of the schemes, such as bankruptcy, banker, security, market, and liquidity risks. While the author does not undertake a complete analysis of the market failures that may justify regulation of non-bank retail payment services, he does set out a broad framework for considering whether users and providers of these services have the incentives to manage the associated risks. Since any regulatory response, if deemed to be justifiable after a more complete analysis, must be balanced in its approach, some of the costs of regulation in this area are also considered.

Suggested Citation

  • Nikil Chande, 2008. "A Survey and Risk Analysis of Selected Non-Bank Retail Payments Systems," Discussion Papers 08-17, Bank of Canada.
  • Handle: RePEc:bca:bocadp:08-17

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    References listed on IDEAS

    1. Kato, Ryo & Nishiyama, Shin-Ichi, 2005. "Optimal monetary policy when interest rates are bounded at zero," Journal of Economic Dynamics and Control, Elsevier, vol. 29(1-2), pages 97-133, January.
    2. Coenen Günter & Orphanides Athanasios & Wieland Volker, 2004. "Price Stability and Monetary Policy Effectiveness when Nominal Interest Rates are Bounded at Zero," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-25, February.
    3. Jeffrey C. Fuhrer & Brian F. Madigan, 1997. "Monetary Policy When Interest Rates Are Bounded At Zero," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 573-585, November.
    4. David L. Reifschneider & John C. Williams, 2000. "Three lessons for monetary policy in a low-inflation era," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 936-978.
    5. Stephen Murchison & Andrew Rennison, 2006. "ToTEM: The Bank of Canada's New Quarterly Projection Model," Technical Reports 97, Bank of Canada.
    6. Reifschneider, David & Willams, John C, 2000. "Three Lessons for Monetary Policy in a Low-Inflation Era," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 936-966, November.
    7. Bernard Babineau & Claude Lavoie & Nicolas Moreau, "undated". "Risques et conséquences d’atteindre la borne inférieure du taux d’intérêt nominal de court terme," Working Papers-Department of Finance Canada 2001-22, Department of Finance Canada.
    8. Gauti B. Eggertsson & Michael Woodford, 2003. "The Zero Bound on Interest Rates and Optimal Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 139-235.
    9. Summers, Lawrence, 1991. "How Should Long-Term Monetary Policy Be Determined? Panel Discussion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 625-631, August.
    10. Alexander L. Wolman, 1998. "Staggered price setting and the zero bound on nominal interest rates," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 1-24.
    11. Jean-Philippe Cayen & Amy Corbett & Patrick Perrier, 2006. "An Optimized Monetary Policy Rule for ToTEM," Staff Working Papers 06-41, Bank of Canada.
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    More about this item


    Financial services; Payment; clearing; and settlement systems;

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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