Skingsley: How the Riksbank encourages innovation in the retail payments market
“Central banks play an important role with regard to developments in the retail payments market. What we do and what we do not do determines the pace and the substance of innovation in the financial system. Central banks have a responsibility for the financial system remaining stable, at the same time as it must be allowed to innovate. It is a question of finding a good balance between regulation and acting to support innovation.” These words are from Cecilia Skingsley's speech today at a seminar on Financial Stability, Innovation and Economic Growth at the World Economic Forum in Davos.
Ms Skingsley points out that the decisions made must balance innovation, stability and growth. "This will by necessity involve deciding upon a suitable degree of public and regulatory intervention in the retail payments market. There will be winners and losers from these decisions. Making the decisions, and finding the right balance, is a major challenge, but also an unavoidable challenge," said Ms Skingsley.
Ms Skingsley also describes the development of Swish as an example of where the Riksbank has encouraged innovation in the retail payments market. Swish enables electronic payments between private individuals 24/7. To make payments between accounts in different banks, it is necessary that money is sooner or later moved between the banks' accounts with the central bank. "The Riksbank established an account in its payments system for this particular purpose, which enables Swish payments between people with accounts in different banks to be made safely even at weekends and evenings," says Ms Skingsley. Today over half of the Swedish population has downloaded the payments app on their smart phone and it has become a prominent feature in the retail payment landscape, providing a substitute for cash in person to person (P2P) payments.
"This shows that the central banks' means of promoting innovation must be adapted to the situation. The trick is to find the right degree of intervention at the right time. A thorough analysis of costs and benefits is needed. And this is precisely what we are doing now, as we investigate the possibility of issuing an e-currency," concludes Ms Skingsley.