Innovation in Payment Systems: The market for credit transfers in Peru

This study is a first approach to identify the factors behind the underdevelopment of the credit transfer market in Peru, despite the lower risk and higher efficiency that this instrument provides to final customers. Following the literature on the topic of innovation, this paper focuses on the notion that payment systems are a network industry and in this context it identifies incentives and constraints for the development of the credit transfer market. We conclude that the limiting factors include: - The fee structure at the level of clearing services and at the level of final customers.•- Incentives for banks’ investment in their own network rather than in the common network. - Lack of financial literacy. - The presence of ad-hoc payment mechanisms that limit the development of payment systems. Thus, in order to develop the credit transfer market, efforts should be made in order to minimize the constraints and disseminate the advantages of using this instrument over cash and checks.