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Transforming Payment Systems: Meeting the Needs of Emerging Market Economies Foreword
Until very recently, interest in payment system issues has often been of secondary importance in the financial sector development agenda. This reflected a view that the payment system is essentially a mechanical process and that nothing more than an automation of commercial banks' back-office support function is required to achieve the goal. Today, there is a growing perception in both the World Bank and its client countries that such a limited view underestimate the role payment systems play in the process of sound financial market development. Hence, payment systems modernization is becoming one of the priorities that needs to be addressed at an early stage to eliminate constraints for the later stages of financial sector development. The Bank's experience in several transitional and developing countries, both successful and unsuccessful, sheds light on what need to be addressed and answered in payments projects, why and how. These valuable experiences must be effectively translated into an improvement in other payment systems projects. This paper by Mr. Setsuya Sato and Professor David Humphrey is one such effort. It was originally prepared to be presented at the World Bank Program on "Payment Systems in Financial Sector Development," which was jointly organized with the Federal Reserve Bank of Richmond under the initiative of the Financial Sector Development Department in April 1995. Given the positive response to this paper, and the ensuing debate it provoked, we decided to publish this paper to a wider audience. We are sure this paper will prove to be of great interest to those who specialize in payment systems issues, as well as those with a broader interest in financial matters during transition and development. Gary Perlin |