Understanding Risk Management in Emerging Retail Payments

lectronic checks, cell phones, and speed-through lanes at toll booths are just a few examples of new payment methods recently introduced to the market. Based on computer technology, online commerce, and telecommunications, these new payment methods rely on electronics for most or all of their functions. Many products based on these methods have failed, some have struggled to grow, and a few have become well accepted in routine commerce. All face a variety of risks. Reflecting these risks, news reports of data breaches, identity theft, and fraud have become a part of the electronic payment landscape. Novel characteristics associated with “emerging” payments include low-cost ways to store and transmit data. These technologies can reduce risk, but they can also lead to new risks. It is timely now to develop a structure and vocabulary for examining how new payment technologies affect risk, particularly as the number of ways to make noncash payments grows and as payments shift from paper-based to electronic form. Understanding the structure of risk is useful, although assessing losses and mitigation efforts in a new payment