The risks and regulation of modern payment media

Abstract

Technology is one of the main driving forces behind almost all innovation taking place in the industrialised world. The impact of these technological developments, in the retail payments arena, has altered the way payment transactions are carried out by people. New electronic payment mechanisms bring with them a number of advantages, such as more rapid access to cash, easier access to payment facilities and more overall convenience. One of the payment mechanisms with which people today effect a large proportion of their payments is the plastic card. This dissertation takes a look at the development of plastic cards, with particular reference to smart cards which sooner or later will become an integral part of the payment system. The principal objective of the dissertation is that of examining the regulatory implications that will arise as a result of the eventual introduction of smart cards in the local scene. Furthermore, the dissertation presents a proposal for the eventual legislation of the issuance and use of smart cards in Malta, and puts forward a number of recommendations in connection with the regulation of smart cards with special emphasis on the relationship between the card issuer and the card holder. This concern for regulation arises from a number of risk-related issues, since technological change increases the level of risk inherent in payment systems. Against this background, the dissertation identifies and analyses some of the more important types of risks associated with smart cards and looks at how regulatory authorities have responded to these changes, and in what manner regulation can be further developed. Whilst there exists a general agreement on the need for further regulation in this area, the dissertation presents the various arguments, backed by research as appropriate, on whether now is the time to regulate or not.