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Payment Services, Fintech, and E-Money: A Comprehensive Overview

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What are Payment Services Providers (PSPs)?

Payment Services Providers (PSPs) hold funds linked to future payment transactions and can be described as flow-through accounts. They play a crucial role in facilitating various types of payments.

Classification of Payment Instruments

The classification of payment instruments follows the methodology outlined in the CPMI countries’ statistics on payments and financial market infrastructures (Red Book statistics). This ensures consistency and accuracy in categorizing different payment instruments.

Mobile Money: A Digital Medium of Exchange

Mobile money is a pay-as-you-go digital medium of exchange and store of value using mobile money accounts, facilitated by a network of mobile money agents. It provides a convenient and accessible means of making payments for individuals who may not have access to traditional banking services.

System Types

There are two main types of payment systems:

  • Overlay Systems: Use existing payment instruments and infrastructure to process, clear, and settle payments.
  • Standalone Systems: “Closed-loop” payment systems that do not depend on existing payment infrastructure. They operate independently and provide a secure means of making payments.

E-Money: A Debt-Like Instrument for Payment Transactions

E-money refers to debt-like instruments issued for the purpose of facilitating payment transactions. It can be redeemed in fiat currency at a pre-established face value upon demand.

Types of E-Money

There are several types of e-money, including:

  • Fixed Value Claim: E-money is a fixed value claim on the balance sheet of the entity issuing it.
  • Redemption Guarantees: The issuer guarantees redemption at face value, which requires holding assets that are sufficiently liquid to meet all redemption requests upon demand.

User Perspective: Convenience and Stability of Value

E-money provides an attractive means of payment due to its convenience and stability of value through redemption guarantees provided by the issuer. This makes it a popular choice for individuals who want to make payments quickly and easily without worrying about the risks associated with traditional payment methods.