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chapter 3

Chapter 3 provides an overview of payment systems, highlighting the transition from commodity money to fiat money and the role of the Bangko Sentral ng Pilipinas. It discusses the advantages and disadvantages of checks, as well as desirable outcomes for modern payment systems, including security, efficiency, and speed. Additionally, it introduces new payment technologies such as ATMs, mobile payments, and cryptocurrencies like Bitcoin.

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Juan John
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6 views

chapter 3

Chapter 3 provides an overview of payment systems, highlighting the transition from commodity money to fiat money and the role of the Bangko Sentral ng Pilipinas. It discusses the advantages and disadvantages of checks, as well as desirable outcomes for modern payment systems, including security, efficiency, and speed. Additionally, it introduces new payment technologies such as ATMs, mobile payments, and cryptocurrencies like Bitcoin.

Uploaded by

Juan John
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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CHAPTER 3

Payment System: Overview


Why is money useful?
Because it is used as a standard of deferred payment (loans) and it facilitates transactions (exchange of goods and services
with money) in the economy.

Commodity Money to Fiat Money

COMMODITY MONEY - Money that is based on commodities


like gold and has independent value.
THE CENTRAL BANK
The main central bank in the Philippines is the Bangko Sentral
FIAT MONEY - Money based on a legal tender (the
ng Pilipinas and has the following functions:
government accepts it) and has no independent value.
Has legal monopoly on the rights to issue money

💡 Around 1500 AD governments realized the


drawbacks of commodity money such as
Holds deposits from banks (Lender of Last Resort) and the
National Government
transportation and risks of theft, due to this they Does not exchange paper currency for commodity money.
started issuing bank certificates that act as proof of
ownership for the gold you own, which was stored by
the bank in a safe place. 💡 It is to be noted that the reason why Fiat money
works is because there is confidence or trust by the
consumers and firms that the money can be used in
transactions.

IMPORTANCE OF CHECKS

Advantages: Disadvantages:

Is a convenient way to settle transactions Requires more steps

Can be used as a proof of promise to pay on demand Costs the economy billiions (enormous flow of checks
money deposited from a bank worldwide)

Can be written for any amount Informations costs

Requires more trusts from the seller (Possible ma bounce


ang check)

💡 Checks were innovated in the Early 20th Century

DESIRABLE OUTCOMES OF A PAYMENT SYSTEM (New Disadvantages of traditional Banking


technology)
Time consuming
Security - It must keep users safe from hackers
Inconvenient
Efficiency - The payment system must be properly
organized while still being low cost

Speed - The time between transactions should be time


efficient

Smooth International Transactions - The payment


system can also be used internationally

Effective Collaboration Among Participants - The


government along with financial institutions come together
to improve the payment system.

EXAMPLES OF NEW PAYMENT SYSTEMS

CHAPTER 3 1
1. Automated Teller Machines

2. Proximity Mobile Payments

3. Automated Clearing House

4. E-Money/E-Wallets

Bitcoin
Runs on a decentralized peer-to-peer system powered by a blockchain and uses a form of cryptocurrency as its virtual money.

💡 The maximum amount of bitcoin that can be mined is 12,000,000

💡 A blockchain is a shared distributed ledger that contains financial information where individuals and firms can settle
transactions instantly and securely.

💡 Federal Reserve found out that e-payments make up more than two-thirds of non-cash payments.

CHAPTER 3 2

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