af Jochnick: Central bank money in the payment market of tomorrow
Cash usage is declining and digitalisation and new technology has made it possible to make payments in real time. Increasing numbers of people are choosing to pay electronically, both person to person and between companies. The Riksbank has a unique role in the payment system and will therefore develop its services so that they also suit such new ways of paying. “My assessment is that the Riksbank has a central role in its responsibility for ensuring that the settlement of payments in kronor can be executed in a swift, secure and efficient manner. This secures a high level of confidence in the payment system,” said First Deputy Governor Kerstin af Jochnick, talking today at the Riksbank.
Date: 24/08/2018 08:30
Speaker: First Deputy Governor Kerstin af Jochnick
Place: Sveriges Riksbank, Brunkebergstorg 11, Stockholm
Settlement in central bank money reduces the risks
Demand for real time payments increases, as does competition, when new players such as Fintech companies start to show an interest in the payment market. Together with the decrease in cash usage, this entails major upheavals on the market.
The Riksbank is investigating how we can develop our system to better meet the increased demand for real-time payments. Our assessment is that the Riksbank should continue to play a central role with responsibility for the Swedish settlement system. I do not think that the private sector can provide a secure and efficient payment system without government interference. At the same time, we have good experiences from the broad collaboration with players in the market and we see great advantages in standardisation, which will also benefit end consumers, continued Ms af Jochnick.
The Riksbank could share a technical platform with other central banks
International demands for settlement systems are extremely high, for obvious reasons. In its assessment, the Riksbank must therefore consider whether we will continue to have a unique Swedish system or whether there are other alternatives. As an example, the European Central Bank is developing a system for real-time payments that will be able to manage other currencies. There will be a possibility for the Riksbank to join this platform, known as TIPS and which will be ready at the end of the year. There are many indications that TIPS will be competitive in cost terms and will meet very stringent security requirements.
However, Ms af Jochnick pointed out, there are also emergency preparedness reasons for developing a domestic Swedish system or, at least, a domestic backup option. However, a completely domestic solution risks being much more expensive than having Sweden join the ECB's system. In this case, the infrastructure for a possible e-krona could provide a possible backup alternative to TIPS.