Tag Archives: Payments

Mastercard Launches New Start Path Cryptocurrency and Blockchain Program for Startup

From creating a marketplace for non-fungible tokens (NFTs) to building an air-gapped cold vault to enabling new sustainable digital assets, seven global crypto and digital assets startups join Mastercard’s award-winning Start Path program to access partnership opportunities, insights and tools to grow.

Mastercard announced today a new Start Path global startup engagement program dedicated to supporting fast-growing digital assets, blockchain and cryptocurrency companies. As a continuation of Mastercard’s digital assets work, seven startups have joined the program, including GK8, Domain Money, Mintable, SupraOraclesSTACS, Taurus, and Uphold, and together with Mastercard seek to expand and accelerate innovation around digital asset technology and make it safer and easier for people and institutions to buy, spend and hold cryptocurrencies and digital assets.

Among the new program participants is Mintable (Singapore), a non-fungible token (NFT) marketplace where users can create, buy and sell digital and physical assets backed by the blockchain such as digital collectibles, avant-garde artwork and even music. The Mintable platform is packed with novel features such as gasless minting and credit card purchasing that are designed to empower the everyday person to get involved with NFTs without any prior knowledge in crypto or coding. GK8 (Israel) is a self-managed end-to-end institutional crypto custody platform that offers a true air-gapped cold vault. This means that the platform is capable of creating, signing and sending secure blockchain transactions without receiving input from the internet, eliminating any potential cyberattack vectors. Taurus (Switzerland) delivers enterprise-grade infrastructure to manage any digital asset with one single platform, including crypto assets, digital currencies and tokenized assets covering issuance, custody, asset servicing and trading.

Other participating startups and fast-growing digital asset and blockchain companies have been selected to join the inaugural track of the Start Path program:

  • Domain Money (USA) looks to build a next generation investment platform, bridging the gap between digital assets and traditional finance for retail investors.
  • SupraOracles (Switzerland) is a powerful blockchain oracle that helps businesses bridge real-world data to both public and private chains, enabling interoperable smart contracts to automate, simplify and secure the future of financial markets.
  • STACS (Singapore) provides a blockchain infrastructure for the financial industry to unlock massive value and enable effective sustainable financing. Its clients and partners include global banks, national stock exchanges, and asset managers.
  • Uphold (USA) is a crypto-native, multi-asset digital money platform offering investment and payment services to consumers and businesses worldwide. Uphold’s unique ‘Anything-to-Anything’ trading experience enables customers to trade directly between asset classes with embedded payments facilitating a future where everyone has access to financial services.

Founders of the digital asset and blockchain companies participating in the new Start Path program aim to address a host of pain points including asset tokenization, data accuracy, digital security and seamless access between the traditional and digital economy. Each startup is focused on solving a unique industry challenge and, throughout the program, will leverage Mastercard’s expertise to support the continued growth and development of their solutions.

Jess Turner, executive vice president of New Digital Infrastructure and Fintech, commented: “Mastercard has been engaging with the digital currency ecosystem since 2015. As a leading technology player, we believe we can play a key role in digital assets, helping to shape the industry, and provide consumer protections and security. Part of our role is to forge the future of cryptocurrency, and we’re doing that by bridging mainstream financial principles with digital assets innovations.”

Digital Assets and Fintech Innovation

Supporting the startup ecosystem is a core part of Mastercard’s ethos, and more than 250 startups have participated in the Start Path program since 2014. With the expansion of Start Path to include fast-growing crypto, blockchain and digital assets startups, Mastercard is providing access to its latest tools and solutions to help these companies scale their innovations and cutting-edge technologies. These startups use the program to connect with our ecosystem of banks, merchants, partners and digital players across the globe to deliver new solutions.

About Mastercard (NYSE:MA):

Mastercard is a global technology company in the payments industry. Our mission is to connect and power an inclusive, digital economy that benefits everyone, everywhere by making transactions safe, simple, smart and accessible. Using secure data and networks, partnerships and passion, our innovations and solutions help individuals, financial institutions, governments and businesses realize their greatest potential. Our decency quotient, or DQ, drives our culture and everything we do inside and outside of our company. With connections across more than 210 countries and territories, we are building a sustainable world that unlocks priceless possibilities for all.

Jerome H Powell: Closing remarks – “Pushing the frontiers of payments: towards faster, cheaper, more transparent and more inclusive cross border payments”

Speech (via prerecorded video) by Mr Jerome H Powell, Chair of the Board of Governors of the Federal Reserve System, at “Pushing the frontiers of payments: towards faster, cheaper, more transparent and more inclusive cross border payments”, a conference hosted by the Committee on Payments and Market Infrastructures, Basel, Switzerland, 18 March 2021.

I would like to thank Sir Jon Cunliffe and the Committee on Payments and Market Infrastructures (CPMI) for inviting me to close out the first day of this conference on pushing the frontiers of payments.

Last year, the Group of Twenty (G-20) asked the Financial Stability Board (FSB) to coordinate the development of a roadmap on how the global community could enhance cross-border payments. It has long been acknowledged that the existing system, while safe and dependable, suffers from frictions, including processes that make it difficult to comply with anti-money-laundering and countering-terrorist-financing requirements, difficulty in managing payments across time zones, and, in certain areas, a reliance on outdated technology. Moreover, these frictions contribute to higher costs for cross-border transactions.

As with many aspects of life these days, the COVID-19 pandemic has shined a light on the less efficient areas of our current payment system and accelerated the desire for improvement and digitalization. Even before the pandemic, advancements in the private sector served as a catalyst to get the attention of consumers and to prompt more engagement by the public sector.

The goal of the FSB roadmap is simple-to create an ecosystem for cross-border payments that is faster, cheaper, more transparent, and more inclusive. A year into the process, I am encouraged that we are making meaningful progress. The stage 3 report released in October laid out a practical set of steps for moving ahead on the 19 building blocks that will bring about an improved system.1

Indeed, the themes discussed in the four sessions of the conference today correspond well to approaches described in the building blocks. The title of the first panel sets up a choice between “improving existing rails or laying new tracks.” As the roadmap makes clear, one of the keys to moving forward will be doing both-improving the existing system where we can while also evaluating the potential of and the best uses for emerging technologies. As an example, the Federal Reserve is working to improve the current system through the introduction of instant or fast payments via the FedNow Service.2 The service will be designed to maintain uninterrupted processing-24 hours a day, 7 days a week, 365 days a year-with security features that will ensure payment integrity and data security. The target launch date is sometime in 2023.*

The Federal Reserve is also doing its part to examine the role of new technologies. Experiments with central bank digital currencies (CBDCs) are being conducted at the Board of Governors, as well as complementary efforts by the Federal Reserve Bank of Boston in collaboration with researchers at MIT. In addition, a recent report from the Bank for International Settlements and a group of seven central banks, which includes the Fed, assessed the feasibility of CBDCs in helping central banks deliver their public policy objectives.3 Relevant to today’s topic, one of the three key principles highlighted in the report is that a CBDC needs to coexist with cash and other types of money in a flexible and innovative payment system.

Improvements in the global payments system will come not just from the public sector, but from the private sector as well. As today’s second panel, “Of Lions and Unicorns,” described, the private sector has the experience and expertise to develop consumer-facing infrastructure that improves and simplifies how the public engages with the financial system. Digitalization of financial services, combined with an improved consumer experience, can help increase financial inclusion, particularly in countries or areas with a large unbanked population.

And the last two panels of the day, “Addressing Legal Barriers to Cross-Border Payments” and “Harmonised Data to Oil the Cross-Border Payments Machinery,” highlight that improving the system must be a collaborative effort. By definition, cross-border payments involve multiple jurisdictions. So it will only be through countries working together, via all of the international forums-the Group of Seven, the G-20, the CPMI, the FSB, and others-that solutions will be possible.

And, finally, it is only by engaging all stakeholders-policymakers, private-sector participants, and academia-as this conference is doing, that we will achieve the improved payments ecosystem we are striving toward.

The COVID crisis has brought into even sharper focus the need to address the limitations of our current arrangements for cross-border payments. And as this conference amply demonstrates, despite the challenges of this last year, we still have been able to make important progress. I again thank the CPMI and Jon Cunliffe for their leadership and look forward to working together as we improve these payments for businesses and individuals alike.

* This sentence was updated after publication: the phrase “sometime in late 2023 or 2024” was updated to “sometime in 2023”. 

1  See Financial Stability Board (2020), Enhancing Cross-Border Payments: Stage 3 Roadmap (PDF) (Basel, Switzerland: FSB, October). 

2  See Board of Governors of the Federal Reserve System (2020), “Federal Reserve Announces Details of New 24x7x365 Interbank Settlement Service with Clearing Functionality to Support Instant Payments in the United States,” press release, August 6.

3 See Bank for International Settlements (2020), “Central Banks and BIS Publish First Central Bank Digital Currency (CBDC) Report Laying Out Key Requirements,” press release, October 9. 

Burkhard Balz: Central bank digital currencies – the future of money?

Speech by Mr Burkhard Balz, Member of the Executive Board of the Deutsche Bundesbank, at the American Council on Germany, virtual event, 10 February 2021.

1 Introduction – Central Bank Money

Dear Steve,
Ladies and gentlemen,

I am delighted to have the opportunity to talk to you about one of the most exciting topics facing central banks today:

The future of money. Do we need other forms of money beside the ones we already have? And do we need other forms of central bank money? Should banks’ deposits with the central bank be tokenised? Should banknotes become digital?

There are many questions surrounding “central bank digital currencies” (CBDC). And we still have to find the right answers. But one thing is certain:  central banks around the world have undertaken tremendous efforts to assess the potential and investigate the opportunities of CBDC.

Just recently, the Bank for International Settlement (BIS) published its third survey amongst central banks worldwide. The survey shows a shift from mainly analytical work towards technical experimentation. More than 60% of central banks are engaged in practical experimental work.1

It is clear, then, that even more headway has been made in exploring central bank digital currencies over the past year. On the one hand, the BIS predicts that central banks representing a fifth of the world’s population will issue a general purpose CBDC in the next three years. On the other, a widespread roll out of CBDCs seems some way off. And there are good reasons for this. Because CBDC is a game changer – with potential benefits, but also with a number of challenges.

Central bank digital currencies promise to combine the improved efficiency of their digital form with the safety provided by a central bank in a single means of payment.

However, central bank digital currency would be a third form of central bank money, alongside cash and bank reserves. Introducing a new form of central bank money such as this could have profound impact on the financial system, especially if it is not only available to banks, but instead, like cash today, to the general public. If not properly thought through, such an intervention may lead to unintended consequences.

Today, I would like to outline to you the areas that I believe we need to tackle in order to create a safe, efficient and future-proof currency. But let me start with three trends we are currently observing: digitalisation, declining cash usage and the emergence of new forms of money.

2 Trends in payments

Trend 1: Digitalisation

Our economy is growing more digital by the day. Business processes are becoming increasingly automated and interdependent. Complex value chains arise. The “Internet of Things” enables machine-to-machine communication. E-commerce and online services of all kinds are about to experience an enormous uptake due to the pandemic. The pace of digitalisation has probably never been faster than today. These developments are increasingly calling for a safe and efficient settlement asset which can be seamlessly integrated into almost any kind of business process. 

Trend 2: Declining use of cash

Parallel to this, we can see that the use of cash is waning, even in Germany. The current pandemic has boosted not only the use of credit and debit cards, but contactless payments, in particular. 

In a recently conducted survey on payment behaviour in Germany during the coronavirus pandemic, we found out that the share of cash transactions has fallen from 74% to 60% over the last three years.2 Admittedly, it remains to be seen whether the current behaviour also persists in the post-coronavirus period. But what we are currently seeing is quite a considerable change for a country which is strongly accustomed to paying in cash.

Trend 3: Emerging means of payments other than €

Another trend is the emergence of new forms of digital means of payments. These can be central bank digital currencies issued by foreign central banks as well as privately issued means of payment such as stablecoins. At the moment, these alternative means of payment are still in the development or testing phase. However, given the speed at which technology is developing, their widespread adoption might be far less off than we think. Should these forms of money become widely used as a medium of exchange or store of value in the euro area, significant implications could arise: for the role of the euro or the payment industry, and consequently also for financial stability. 

3 Central banks need to be prepared

The three trends I have just outlined highlight that, if the payments ecosystem is going to expand, central banks need to be prepared.

As highlighted in the report by the BIS and seven central banks, central banks need to be in a position to make an informed judgment when it comes to the decision on a central bank digital currency.3

Any dedicated central bank digital currency should be designed carefully. Possible advantages such as safety and efficiency improvements in everyday payments, productivity gains by promoting money which could be used in programmable environments, or the availability of new services must clearly outweigh the potential risks with regard to monetary policy or financial stability. In any case, it must be properly designed so as to mitigate all of those risks.

The Eurosystem is taking a comprehensive approach to addressing these challenges. As part of a high-level Eurosystem task force, my colleagues and I identified possible scenarios that would require the issuance of a digital euro and published them last October in the ECB’s “Report on a digital euro”4 The Governing Council of the ECB has not yet reached a decision on whether to introduce a digital euro. We must first be sure that there is a need to issue CBDC and, if so, that we are able to manage the accompanying risks. In the digital age, time is of essence. But we also have to take the time to do our homework.

Therefore, the Eurosystem has started to engage widely with citizens, academia, the financial sector and public authorities to assess in detail their needs, as well as the benefits and challenges they expect from the issuance of a digital euro. In mid-January, a public consultation on the digital euro came to an end with record levels of participation from European citizens.

Experimental work supports the analysis of possible technical designs and their implications. Further outreach to the market and exchange with other international central banks leading the work on central bank digital currencies will follow. And this brings me to my last point.

4 International dimension will be key 

International cooperation will be key in shaping the future ecosystem for central bank digital currencies.

As the BIS and other central banks have rightly emphasised in their report5 regardless of the final design, there are certain core features and common standards that are valuable in guiding a central bank when deciding to issue a digital currency for the public.

The features I consider most relevant in this context are convertibility, interoperability and international standards.

Convertibility is essential to ensure trust in a currency. People must be sure they can exchange the form of the money they hold at par at any point in time.

Interoperability is required to ensure a smooth exchange of money between different kinds of payment systems. In a digitalised world, this is an absolute prerequisite to ensure an efficient financial system.

Finally, appropriate international standards are the focal point in ensuring an efficient cross-border payments flow.

In my view, these three features are the key determinants of a stable and broadly accepted digital currency that fits into the international financial system.

Against this backdrop, safe and efficient payment markets must be brought to the next level, in particular for cross-border and cross-currency payments. This topic has been on the agenda for several years. While we have seen significant progress in improving payments at the domestic or regional level, cross-border payments are, putting it bluntly, still in the medieval age.

The G20 roadmap on enhancing cross-border payments is an important step in this direction. The Committee on Payments and Market Infrastructures, together with the Financial Stability Board and the BIS, has set up a comprehensive working programme encompassing 19 building blocks across five focus areas, including new payment infrastructures and arrangements, which covers central bank digital currencies, amongst other things.

This work can only serve the long-term goal of achieving a fair and sustainable payments landscape, as long as international cooperation thrives.

I am optimistic that this fruitful work initiated by the G20, but also in the form of other international formats, will continue. CBDC might not be the panacea for all challenges that payments are facing. But it might be an option, including for cross-border payments.

In a nutshell, payments are – and always will – be a backbone of the economy. The digital economy has already changed the payment landscape quite significantly and will continue to do so in future. It is the responsibility of the central bank to create trust in its currency and to ensure that payments remain competitive, innovative and safe. We also have to ensure that central bank money will be offered in a way that is compatible with the digital economy.

Let me finish with the words of Abraham Lincoln: “The best way to predict the future is to create it.”

1 BIS Papers No 114, Ready, steady, go? – Results of the third BIS survey on central bank digital currencies (January 2021).

2 https://www.bundesbank.de/en/tasks/topics/making-payments-in-2020-the-year-of-covid-19-card-based-and-contactless-payments-trending-823592

3 https://www.bis.org/publ/othp33.pdf

4 https://www.ecb.europa.eu/pub/pdf/other/Report_on_a_digital_euro~4d7268b458.en.pdf

5 https://www.bis.org/publ/othp33.pdf

Timothy Lane: Payments innovation beyond the pandemic


Good morning, and thank you for hosting me today.

Digitalization: I’m sure many of you share my sentiments about these virtual events—that we would much rather be together in person, and yet we are grateful for the technology that allows us to gather online.

The need to switch to this digital platform is, of course, just one small example of the changes brought on by the global pandemic. COVID-19 has claimed the lives of far too many—in Canada, we have lost more than 20,000 people. The virus has had a devastating impact on households and businesses across the country. Almost overnight, the Canadian economy suffered its worst setback since the Great Depression.

One major impact of the pandemic is certainly familiar to all of us by now: the digitalization of our personal and professional lives has accelerated.

In my remarks today, I’ll focus on how these developments have affected the world of payments. I’m referring to changes in the way Canadian consumers and businesses pay for goods, services and financial assets. I’ll begin by talking briefly about the economic consequences of the pandemic. Then I’ll go on to discuss the implications for three main aspects of payments.

The first is the concept of a central bank digital currency—a “digital loonie,” as it were. For several years, the Bank of Canada has been analyzing which circumstances might lead Canada to decide to issue a digital currency. The pandemic may bring us to a decision point sooner than we had anticipated.

Next, I’d like to look at a major program of payment system modernization underway in Canada. Consumers and businesses will see the benefits of this modernization rolling out this year and next. The pandemic has underscored the importance of expanding the reach of real-time payments.

Finally, I will address the issue of cross-border payments, which are often slow, expensive and vulnerable to fraud. The Bank has collaborated with international partners on a roadmap to address the pain points in cross-border payments. We are fully committed to working with the public and private sectors to make any necessary changes in Canada to support this.

COVID-19 and the digital economy

The digitalization of the economy was well underway before COVID-19 hit, but the changes brought on by the pandemic have been rapid and far-reaching.

As a society, we had to quickly implement the virtual workplaces we had largely only been imagining. Nearly one-third of Canadians are mostly working from home,1 including me—I have been in my office only eight times since last March. In addition, many students continue to learn virtually.

COVID-19 has also changed how we shop. A survey of Canadian retailers shows that e-commerce has nearly doubled from pre-pandemic levels.2

Businesses are responding to the pandemic by incorporating new technologies into their operations. In our most recent Business Outlook Survey, nearly two-thirds of participating firms reported that they are making some kind of digital investment.3 Expanding their business online was commonly cited as the reason for these investments—on both the operations and client-facing sides.

Among these developments is a shift toward the increasing use of digital payments. For example, a November 2020 survey found that two-thirds of small businesses now accept payments online—and half of them started doing so only recently.4

Even when Canadians pay for goods in person, contactless options appear to be gaining traction. Interac reports that the volume of Interac Flash transactions grew by two-thirds in July 2020 compared with April.5 Consumer surveys also report that contactless payments have increased.6

The Bank of Canada has been carefully watching these trends. We are particularly interested in how the pandemic has changed the way that Canadians purchase goods and services. And we are keenly aware of the need to seize the opportunities that lie before us to give Canadians even better, cheaper and faster payment methods.

Cash: physical and digital

Let’s start with Canadian bank notes.

As we have all embraced technology and its many innovations, one thing that hasn’t changed as much is cash. It’s true that the Bank has updated bank notes in new and exciting ways. We’ve incorporated state-of-the-art security features to combat counterfeiting. We now make bank notes using polymer instead of paper. And we’ve made a concerted effort to ensure the images and portrait subjects on bank notes reflect Canada’s unique and changing identity.

But the basic nature of bank notes has not changed—they are still physical objects.

However, for the past decade or so, the Bank has been considering these bank notes, and we’ve been asking ourselves: could Canada and Canadians benefit from a digital form of cash?

In a speech in Montréal a year ago, I gave our preliminary view: we did not see a need for a central bank digital currency at that time, but we could imagine scenarios that could make a central bank digital currency beneficial in Canada. I concluded that we would move forward to develop such a digital currency as a contingency plan, given how quickly the world is changing and the time required to develop a viable product.7

A year later, our view remains unchanged: a digital currency is by no means a foregone conclusion.

That said, the world has been changing even faster than we expected. In fact, just two weeks after I spoke, the first lockdown was imposed, which accelerated the evolution of the digital economy. And so our work to prepare for the day when Canada might want to launch a digital loonie—backed by the Bank—has also accelerated.

We are not alone. In a recent survey, almost 60 percent of central banks reported the possibility that they will issue a central bank digital currency within six years. This is up from less than 40 percent only a year ago.8

One scenario we have been watching is whether a sharp decline in the acceptance of cash reaches a tipping point in Canada. We’ve already seen that as societies and economies modernize, cash has been losing ground to digital methods of payment—around the world and here at home.9

Since COVID-19 hit, we’ve seen a growing hesitancy in Canada to use cash. Although Canadians are holding more cash than ever, cash may not currently be circulating as much. In recent Bank of Canada surveys, consumers report some merchant preference for contactless payments, and some report experiencing merchants’ refusal of cash due to fears of virus transmission.10 Of course, it’s too early to tell whether these trends will continue beyond the pandemic, but we are watching closely.

The other scenario I raised in my speech last year is the increasing use of digital currencies created by the private sector, including cryptocurrencies and so-called stablecoins. While these products have existed for several years, some could see a boost from the acceleration of digitalization in the midst of the pandemic.

Even in this increasingly digital economy, though, cryptocurrencies such as bitcoin do not have a plausible claim to become the money of the future. They are deeply flawed as methods of payment—except for illicit transactions like money laundering, where anonymity trumps all other features—because they rely on costly verification methods and their purchasing power is wildly unstable. The recent spike in their prices looks less like a trend and more like a speculative mania—an atmosphere in which one high-profile tweet is enough to trigger a sudden jump in price.

In contrast, widespread adoption of stablecoins for everyday transactions is possible, although none is near that point yet. Because in most cases they are partly or fully backed by safe assets, their purchasing power is designed to be more stable.

But many issues need to be addressed before we can be confident that stablecoins can be used safely by the general public. The Financial Stability Board is examining these issues at the global level, and I am chairing the international working group that is taking this work forward. Here in Canada, we still have work to do to ensure that our regulatory framework covers these new products.

Amid all of these developments, two fundamental questions need to be addressed: Are there benefits to issuing a digital form of money? And if yes, who should do so?

In response to the first question, we don’t yet know whether many Canadians will actually want to use a stablecoin or any other kind of digital currency when they have alternatives available—cash, debit, credit and electronic transfer. Would the addition of a digital form of cash to the existing suite of digital payment methods meet a real demand and enhance the evolution of a competitive, vibrant digital economy? More work is clearly needed to identify the potential benefits to users, compared with other alternatives. And of course we also need to study potential risks.

In response to the second question, if the public does want a digital cash-like currency, some good reasons illustrate why a central bank—a trusted public institution—should issue it.

Currency is a core part of the Bank’s mandate, and the integrity of our currency is a public good that all Canadians benefit from. Only a central bank can guarantee complete safety and universal access, and with public interest—not profits—as the top priority.

Let me spell out one aspect.

It has been said that in the digital economy, data is the new oil. Many technology companies follow a business model in which they use their customers’ data to refine and expand the range of products and services they offer to the public. This, in turn, pulls more and more business onto their platform, which generates more data, and so on.

If that business model were used as a foundation for the dominant method of payment in the economy, the issuer would gain control over an enormous range of data—bringing with it overwhelming market power.11 In effect, a technology company could become the gatekeeper of the entire economy, with concerning implications for privacy, competition and inclusion.

Let’s compare this with a central bank digital currency. A central bank—with no commercial motivation to harvest data—is uniquely positioned to build in safeguards for privacy, while at the same time defending against criminal uses. Privacy is clearly important to Canadians, and it’s also in the public interest to protect some degree of privacy.12

Universal access would need to be another key feature of a central bank digital currency. That means ensuring that remote and marginalized communities—including but not limited to the underbanked and unbanked—are not left out of this new way to pay for goods and services.

As part of our advancing work, the Bank has been researching and experimenting with different technologies. In addition, we recently engaged three university project teams to independently develop proposals for what a digital currency ecosystem could look like. Their reports will be released tomorrow. This blue-sky thinking will help inform our research going forward.

We are also carefully considering what the business model for a Canadian central bank digital currency might look like: What role would the private sector play in its development, distribution and transfer? How would this product interface with Canada’s core payments systems that transfer funds among financial institutions to settle both retail and large-scale payments?

Modernizing our core payments systems – digitalization

Long before the pandemic hit, efforts to modernize Canada’s core payments systems had already begun. This work is important, and with the rapid expansion of the digital economy accelerated by the pandemic, we can now see the benefits more clearly.

Led by Payments Canada, several key players in the payments ecosystem—such as Interac, commercial banks and other stakeholders—have been working to bring these payments systems fully into the modern digital age. The Bank of Canada is heavily involved as a central bank, a regulator and, in some cases, a participant.

Over the next year or so, these improvements will start to come online. This is important for Canadians because it will mean greater speed, convenience, competition and choice in how people pay for goods and services.

Right now, the fastest and most immediate money transfers we see are e-Transfers. But the new Real-Time Rail system—which will go live in 2022—will provide real-time payments beyond what is already offered through e-Transfer.

When this innovation is complete, we can imagine scenarios like these: businesses being able to pay part-time workers immediately upon completion of their shift; homebuyers putting down the deposit on their first home with a click of a button instead of physically taking a bank draft to their lawyer’s office; and governments being able to distribute emergency funds in a matter of seconds, directly into citizens’ bank accounts.

The Bank is also helping to improve other core payments systems. This includes an interbank payment system called Lynx, which will replace the current Large Value Transfer System this autumn. Lynx’s up-to-date technology includes enhanced safeguards against cyber and other risks. Another system we’re looking to improve is the one that clears cheques and other low-value payments. Improvements here will further expand consumers’ choices for convenient digital payments.

Two other important developments, which I will briefly describe, will complement these changes.

The first is retail payments supervision. This past August, the Bank assumed oversight responsibility for the Interac e-Transfer system under our current mandate. And the Government of Canada has announced its intention to give the Bank of Canada further oversight authority for retail payment service providers—companies that aren’t traditional banks but specialize in processing payments for the public. By ensuring that risks are well managed, the Bank, through its new supervisory role, will support confidence in payment service providers and should further encourage competition and innovation in retail payments.

The second development is open banking, which will remove the barriers for banking customers to safely and easily share their financial information if they choose to engage other service providers in managing their money and other assets. Open banking will help promote greater competition and choice by allowing consumers and businesses to more easily compare the products and services various financial institutions offer.

Several countries have already introduced open banking, and the federal government has launched consultations on how to implement it in Canada. This is being done to ensure that innovations are balanced with data control and privacy considerations.

We have come a long way, but more work remains. And this work takes on greater urgency as we find ourselves in an environment where the current system’s shortcomings could limit the ability of consumers and businesses to pursue the opportunities created by the digital economy.

Thankfully, Canadians can look forward to significant improvements in the speed, convenience, efficiency and choice of digital payments in the near future. This is an important part of the Bank’s responsibility to promote safe, sound and efficient financial systems.

Cross-border payments

I’d like to turn now to the issue of cross-border payments, an area that has an obvious and pressing need for improvement. Sending money abroad has always been notoriously slow and expensive for individuals and businesses—so much so that it interferes with lives and livelihoods.

Issues with cross-border payments affect millions of Canadians. This includes new Canadians who send money to family in their country of origin. It includes snowbirds who split their time between Canada and warmer climates—although not this winter, for the most part. And it includes many Canadian businesses that face unnecessary costs and delays in paying for supplies and services from abroad or in receiving payment for the things they sell outside the country.

Beyond our borders, the issues are even more pressing for developing countries, where many individuals rely on family members abroad to send them money so they can afford basic necessities such as food, clothing and education. Many of these needs have become more acute with the uneven global impact of the pandemic. Put simply, the problems with sending money across borders create disadvantages that can prevent already impoverished people and countries from fully participating in the global economy.

In fact, these issues have been used as an argument for the creation and use of cryptocurrencies and stablecoins. But there is plenty of room to improve cross-border payments without using these novel methods of payment, which would not by themselves fix the problems with cross-border payments.

As part of an initiative endorsed by the G20 and coordinated by the Financial Stability Board, the Bank of Canada and other central banks and regulators have developed a roadmap to solve some of these problems. Our main goal is to support faster and cheaper cross-border payments that are more accessible and transparent.

As I mentioned at the beginning of my speech today, we have identified numerous pain points in cross-border payments. Technological shortcomings certainly pose problems with different messaging standards in different countries. Anti-terrorism and anti–money laundering regulations—while crucial for our safety and security—can also slow the transfer of money, with multiple compliance checks. And of course, there are numerous time zones to consider. When you send money from Ottawa at noon all the way to Cambodia, the local payment system there isn’t open at midnight to process the funds.

The G20 roadmap is extensive and lays out work that several different organizations will carry out. For our part, the Bank is working with partners internationally—most notably the Committee on Payments and Market Infrastructures at the Bank for International Settlements. But just as important, we’re also putting the pieces in place in Canada to support the coordinated domestic effort that will be necessary to identify and address the most pressing issues from a Canadian perspective.

For all of these efforts to be successful, central banks and other authorities around the world who are working on this will need the cooperation of public and private sector partners in their own jurisdictions. Only then can we make lasting improvements to cross-border payments and ensure that people, businesses and nations around the world have the best opportunity to truly participate in the global economy.


Canadians may take our current payments ecosystem for granted because buying goods and services is already relatively simple. Long gone are the days when making a large impulse buy on a weekend was next to impossible, because your bank wasn’t open for you to withdraw cash.

But that doesn’t mean there aren’t opportunities to provide Canadians with greater choice in how they pay for goods and services. Digital payment methods are integral to a truly digital economy, and can open up endless possibilities for further digital innovation.

And as we all struggle with the personal, professional and economic ramifications of the pandemic, it’s even more important that the Bank move forward with this work.

The Bank will continue to explore the possibilities of a digital currency that would be an electronic version of the bank notes that Canadians trust and rely on. We will issue such a currency only if and when the time is right, with the support of Canadians and the federal government, and with the best evidence in hand.

We can and will make our core payments systems more effective and efficient to help consumers and businesses exchange funds in real time.

And we will push forward with work to make cross-border payments cheaper, easier and safer for people around the globe to send and receive money.

Thank you again for having me, and I look forward to your questions.

I would like to thank Scott Hendry, Darcey McVanel, Christopher Reid and Francisco Rivadeneyra for their help in preparing this speech.

  1. 1. Statistics Canada, “Labour Force Survey, December 2020,” The Daily (December 2020).[]
  2. 2. Statistics Canada, “Monthly Retail Trade Survey,” (October 2020).[]
  3. 3. Bank of Canada, Business Outlook Survey—Winter 2020–21 (January 2021).[]
  4. 4. PayPal Canada, Business of Change—PayPal Canada Small Business Study (November 2020).[]
  5. 5. Interac, “Interac Debit data: Signs of COVID-19 recovery,” press release.[]
  6. 6. H. Chen, W. Engert, K. P. Huynh, G. Nicholls, M. Nicholson and J. Zhu, “Cash and COVID-19: The Impact of the Pandemic on the Demand for and Use of Cash,” Bank of Canada Staff Discussion Paper No. 2020-6 (July 2020).[]
  7. 7. T. Lane, “Money and Payments in the Digital Age” (speech to the CFA Montréal FinTech RDV 2020, Montréal, Quebec, February 25, 2020).[]
  8. 8. C. Boar, H. Holden and A. Wadsworth, “Impending Arrival—A Sequel to the Survey on Central Bank Digital Currency,” Bank for International Settlements Working Paper No. 107 (January 2020). []
  9. 9. K. Huynh, “How Canadians Pay for Things,” Bank of Canada The Economy, Plain and Simple (October 2019).[]
  10. 10. H. Chen, W. Engert, K. P. Huynh, G. Nicholls, M. Nicholson and J. Zhu, “Cash and COVID-19: The Impact of the Pandemic on the Demand for and Use of Cash,” Bank of Canada Staff Discussion Paper No. 2020-6 (July 2020).[]
  11. 11. J. Chiu and T. Koeppl, “Payments and the DNA of Big Tech.” Presentation at The Future of Money and Payments: Implications for Central Banking, Bank of Canada Annual Economic Conference, November 5, 2020.[]
  12. 12. R. J. Garratt and M. R. C. Van Oordt, “Privacy as a Public Good: A Case for Electronic Cash,” Bank of Canada Staff Discussion Paper No. 2019-24 (July 2019).[]

Innovation and Regulation in the Australian Payments System

Philip Lowe – Governor: Address to the Australian Payments Network


Thank you for the invitation to join you today. It is very good to see the tradition of AusPayNet’s annual summit continue, even if it is taking a different form this year.

As we all know, the world of payments has become an area of excitement: it brings together two things that people have a fascination with – money and technology. The pace of change is rapid and the payments landscape is complex and evolving quickly. New technologies are creating new ways of moving money around and new business models are emerging. There are also new players, including the big techs and the fintechs. And blockchain and distributed-ledger technologies are opening up new possibilities. This innovation is raising many issues for both the payments industry and for regulators.

This morning I would like to discuss some of these issues and their implications for the regulatory framework. I will then discuss some of the Payments System Board’s preliminary views from its Review of Retail Payments Regulation.


The Payments System Board has a long standing interest in promoting innovation in the Australian payments system. Those of you who have followed our work over the years will recall that back in June 2012 the Board released a report titled ‘Strategic Review of Innovation in the Payments System’.

In promoting innovation we have employed a mix of strategies. We have used a combination of:

  1. suasion and pressure on industry participants to do better
  2. regulation to promote competition and access
  3. using our position to help overcome coordination problems, which can act as a barrier to innovation in a network with many participants
  4. helping the industry establish benchmarks that can be aspired to collectively.

I will leave it to others to judge the success of this mix of strategies. But from my vantage point, Australians enjoy an efficient and dynamic payments system. There are still gaps that need addressing, but by global standards we have done pretty well. Australians were early and rapid adopters of tap-and-go payments and increasingly are using digital wallets. We have a very good fast payments system, which after a slow start, is seeing continuing strong volume growth. And there is a roadmap for the development of new payment capabilities using this fast payments infrastructure. I would though like to draw your attention to two areas where we would like to see more progress.

The first is the move to electronic invoicing and the ability to link e-invoices to payments as a way to improve the efficiency of business processes. The second is improvements to the speed, cost and transparency of cross-border retail payments and international money transfers. We are looking forward to progress on both fronts.

Against the backdrop of this generally positive picture, the Payments System Board recognises that the structure of payment systems is changing. In some cases it is now better to think of a payments ecosystem, rather than a payments system. In this ecosystem, the payment chains can be longer and there are more entities involved and new technologies used. This more complex and dynamic environment is opening up new opportunities for innovation as well as new competition issues to consider.

One of the factors driving innovation is the increasing interest of technology-focused businesses in payments. These businesses include the fintechs and the large multinational technology companies, often known as the ‘big techs’. They are a source of innovation and are playing a role in the development of digital wallets. These wallets are being used more frequently and I expect this trend has a long way to go. Another trend is the increasing use of payments within an app. Big techs are playing important roles on both fronts.

This influence of the big techs is perhaps most evident in China, with Ant Group (owners of Alipay) and Tencent (WeChat Pay) having developed new payments infrastructure that has led to fundamental changes in how retail payments are made in China.

In Australia and many other countries, Google, Apple, Facebook and Amazon are increasingly incorporating payments functionality into their service offerings. Mobile wallets such as Apple Pay and Google Pay are the most prominent examples of this in Australia. In some other countries the big techs are also offering person-to-person transfers and consumer credit products. Facebook also announced its Libra project.

The Apple Pay and Google Pay wallets illustrate some of the new and complex issues that are arising. These wallets are clearly valued by consumers and they will reduce industry-wide fraud costs through the use of biometric authentication (e.g. fingerprint or facial recognition). The tokenisation of the customer’s card number is also a step forward. So these wallets are a good innovation. At the same time, though, they are raising new competition issues.

One of these relates to the restriction that Apple, unlike Google, places on access to the near-field communication (NFC) technology on its devices. Many argue that this restriction limits the ability of other wallet providers to compete on these devices and that this could increase costs. This issue has recently attracted the attention of policymakers in several countries. For example, in 2019 the German parliament passed a law requiring device manufacturers to provide third parties with access to technologies (such as NFC) that support payments services. And the European Commission announced in June that it would commence a formal antitrust investigation into Apple’s restriction of third-party NFC access on the iOS platform and in September announced that it will also consider legislation on third-party access. This issue has also been raised in submissions to our review of payments system regulation, and we are watching developments in Europe and elsewhere closely.

Another issue being raised by these wallets is the value of information and data, and again we observe Google and Apple taking different approaches. Google states that it may collect information on transactions made using Google Pay, which can be used as part of providing or marketing other Google services to users. In contrast, Apple states that it does not collect transaction information that can be tied back to an individual Apple Pay user. There are also different approaches to charging transaction fees. Apple charges a fee to issuers when a transaction is made with the Apple Wallet but a similar fee is not charged by Google when transactions are made with Google Pay. It is certainly possible that these different approaches to the use of data on the one hand and access and fees on the other are linked. So there are issues to consider here too.

Beyond the issues raised by digital wallets, there are other competition issues raised by the involvement of the big tech companies in payments.

These companies are mostly platform businesses that facilitate interactions between different types of users of their platform. They have very large user bases, benefiting from strong network effects that can make it hard for competitors. Data analysis is part of their DNA and they have become increasingly effective at commercialising the value of data they collect and analyse. Providing additional services, such as payments, also reduces the need for users to ‘leave’ the platform. So there are complex issues to be worked through here. One of these is the terms of access to the platform and whether the platform requires that payments be processed by the platform’s own payment system.

One specific issue that is raised by both digital wallets and the big techs is the nature of the protections that apply to any funds held within any new payment systems, and outside the formal banking sector. For confidence in the system and for the protection of individuals and businesses it is important that strong arrangements are in place.

In this regard, I welcome the Government’s announcement that it will accept the Council of Financial Regulators’ proposed reforms of regulatory arrangements for so-called stored-value facilities. Under the proposals, APRA and ASIC will be the primary regulators, with requirements tailored to the nature of the facility. It would be possible, for example, to ‘designate’ a provider of a stored-value facility as being subject to APRA prudential supervision on the basis of financial safety considerations. This could become relevant if the technology companies were to launch new payment and other products that held significant customer funds.

Internationally, this and related issues came to prominence following Facebook’s announcement that it was developing a global stablecoin (originally called Libra, but recently rebranded as Diem). Since the original announcement, the Libra Association (now the Diem Association) has also announced plans to launch some single-currency stablecoins intended for use in consumer digital wallets. In April, the Association applied to FINMA (the Swiss financial regulator) for a payment system licence.

This initiative has raised concerns from governments and regulators in many jurisdictions regarding a wide range of issues including consumer protection, financial stability, money laundering and privacy. The Swiss authorities have established a regulatory college to coordinate with other countries. The RBA is participating in this college on behalf of Australia’s Council of Financial Regulators. FINMA has indicated that Diem will be subject to the principle of ‘same risks, same rules’ – that is, if Diem poses bank-like risks it will be subject to bank-like regulatory requirements. It remains to be seen how this and other similar initiatives progress.

As I said at the outset, the world of payments is becoming more complex and raising new issues for industry participants and regulators to deal with. This means that it is timely to consider how the payments system should be regulated and the Payments System Board welcomes the Government’s review of the regulatory architecture.

The legislation governing the Reserve Bank’s regulatory responsibilities was put in place over 20 years ago. This legislation gives the Bank specific powers in relation to payment systems and participants in those systems. While the powers are quite broad, in practice the Bank has the ability to regulate only a fairly limited range of entities. As I mentioned earlier, these regulatory powers have been used in conjunction with our ability to persuade and to help solve coordination problems in networks. As part of the Government’s review it is worth considering what the right balance is here and whether the regulatory arrangements could be modified to better address the complexities of our modern payments ecosystem.

An update on the Review of Retail Payments Regulation

At the same time that we have been considering these broad issues, the Payments System Board has been conducting its periodic Review of Retail Payments Regulation in Australia. This review was temporarily put on hold during the pandemic but has now restarted. I would like to use this opportunity to provide you with a sense of our thinking on three important issues:

  1. interchange fee regulation
  2. dual-network debit cards and least-cost routing
  3. ‘buy now, pay later’ (BNPL) no-surcharge rules.

I want to stress that we have not yet reached any final conclusions and the Bank’s staff will be meeting with industry participants over the next few months to discuss these and other issues. If, at the conclusion of the review, we are to make changes to the standards it is our intention to consult on these by mid 2021.

Interchange fee regulation

The Board’s view is that interchange fees should generally be as low as possible, especially in mature payments systems. While these fees might arguably play a role in establishing new payment methods, once a payment system is well established these fees increase the cost of payments for merchants and they can distort payment choices. So the direction of change in these fees over the medium term should be down, and not up.

Having said that, at the current point in time the Board does not see a strong case for a significant revision of the interchange framework in Australia.

The current interchange standards have been in effect for only 3½ years and submissions to the review did not point to strong arguments for major changes. The standards appear to be working well and frequent regulatory change can carry costs. It is also relevant that the average level of interchange rates in Australia is quite low by international standards, particularly the 8 cents benchmark for debit card payments. Credit card interchange fees are also lower than in most countries. One exception is the lower credit card interchange fees in Europe. The Board is watching the European experience closely and expects that, over time, a stronger case will emerge for lower credit card interchange fees in Australia.

There is one aspect of the interchange regulations where the Board is considering a change as part of the review – that is the cap on the fees that can be applied to any particular category within a scheme’s schedule of debit card interchange fees. Currently a 20 basis point cap applies when a fee is expressed in percentage terms and a cap of 15 cents applies when the fee is expressed in terms of cents. The Board sees a case to lower this 15 cents cap.

This case has emerged as there has been an increasing tendency for interchange fees on transactions to be set at the 15 cents cap, particularly on transactions that are less at risk of being routed to another scheme. At the same time, the international schemes are setting much lower strategic rates for some merchants, particularly larger ones, in response to least-cost routing. This is resulting in large differences in interchange fees being paid on similar transactions, with unreasonably high interchange fees on some low-value transactions, especially at smaller merchants. For example, a 15 cent interchange fee on a $5 transaction is equivalent to an interchange rate of 300 basis points, which is far higher than would apply to that transaction if a credit card had been used. Over the coming months, Bank staff will be seeking further information from the industry on this issue as the Board considers a lower cap.

Dual-network debit cards and least-cost routing

The second issue is dual-network debit cards and least-cost routing.

The Board has long held the position that merchants should have the freedom and the capability to route debit card transactions through the lower-cost network. The Government and a wide range of stakeholders have a similar view. It is understandable why: this choice promotes competition and helps keep downward pressure on the cost of goods and services for consumers.

Over recent years, the Board has discussed the right balance between regulation and suasion to achieve this outcome. Its judgement has been that the best approach was for the industry itself to support least-cost routing, pushed along by pressure from the RBA. While progress has been slower than we would have liked, the slow progress by the major banks did create competitive openings for other players, which led to some innovation. The major banks now also all offer least-cost routing, with some making it the default offering for small and medium-sized businesses. So there has been significant progress. The Board is not convinced that a better outcome would have been achieved through regulation.

The concept of least-cost routing is most applicable when a physical card is used and where that card has two networks on it. One recent trend that we have observed is that some issuers have sought to move away from dual-network debit cards to issue single-network cards, with no eftpos functionality. This may be partly in response to financial incentives from the international schemes and possibly the additional costs to issuers from supporting two networks on a card.

Notwithstanding this trend, the Board’s view is that it is in the public interest for dual-network cards to continue and to be the main form of debit card issued in Australia. It is also important that acquirers and other payment providers offer or support least-cost routing and that the schemes do not act in a way that inappropriately discourages merchants from adopting least-cost routing.

The Board is again considering the best balance between regulation and suasion to achieve these outcomes. Consistent with its earlier approach, its preference is for the industry to deliver these outcomes without regulation. To help achieve this, the Board is considering setting out some formal expectations in this area. If these expectations are not met, the Board would then consider regulation.

To be clear, the Board sees a strong case for all larger issuers of debit cards to issue cards with two networks on them. At the same time, it recognises that there can be additional costs of supporting two networks, which can make it harder for new entrants and small institutions to be competitive. So it may not be appropriate to expect very small issuers to issue such cards. Over the months ahead, the Bank will be consulting with small authorised deposit-taking institutions and the schemes to get a clearer picture of the costs and their implications for determining any regulatory expectations.

The Board also expects that in the point-of-sale or ‘device-present’ environment all acquirers should provide merchants with the ability to implement least-cost routing for contactless transactions, possibly on an ‘opt-out’ basis.

In the online or ‘device-not-present’ environment, it is not yet clear how least-cost routing should operate and what expectations on its provision might be appropriate. In this environment, there is scope for consumers to make more active choices, there are various technical challenges to least-cost routing and there can be more providers in the payments chain. So the idea of how least-cost routing might apply in the online world will be explored by the Bank’s staff over coming months.

Buy now, pay later no-surcharge rules Payments

The third issue that I’d like to cover is the no-surcharge rules of buy now, pay later providers.

The Board’s long standing view is that the right of merchants to apply a surcharge promotes payments system competition and keeps downward pressure on payments costs for businesses. This is especially so when merchants consider that it is near essential to take a particular payment method for them to be competitive.

The Board also recognises that it is possible that no-surcharge rules can play a role in the development of new payment methods. While new payment methods can be developed without them, these rules can, under some circumstances, make it easier to build up a network and thereby promote innovation and entry.

The Board’s preliminary view is that the BNPL operators in Australia have not yet reached the point where it is clear that the costs arising from the no-surcharge rule outweigh the potential benefits in terms of innovation. So consistent with its philosophy of only regulating when it is clear that doing so is in the public interest, the Board is unlikely to conclude that the BNPL operators should be required to remove their no-surcharge rules right now.

Even the largest BNPL providers still account for a small proportion of total consumer payments in Australia, notwithstanding their rapid growth. New business models are also emerging, including some that facilitate payments using virtual cards issued under the designated card schemes that are subject to the existing surcharging framework. In addition, the increasing array of BNPL providers is resulting in competitive pressure that could put downward pressure on merchant costs.

The Board expects that over time a public policy case is likely to emerge for the removal of the no-surcharge rules in at least some BNPL arrangements. Some of the BNPL operators are growing rapidly and becoming widely adopted by merchants, particularly in certain sectors. As part of the Bank’s ongoing consideration of this issue, Bank staff will be discussing with industry participants possible criteria or thresholds for determining when no-surcharge rules should no longer be allowed.

If the point is reached where the Board’s view is that the public interest would be served by the removal of a no-surcharge rule, the Board’s preference would be to reach a voluntary agreement with the relevant provider. This would be similar to the approach adopted with American Express and PayPal. In the event that this were not possible, the Bank would discuss with the Australian Government the best way to address the issue. More broadly, as I discussed above, the current Treasury review of the regulatory architecture provides an opportunity to look holistically at this issue and whether the existing legislation and regulatory provisions could be amended to better reflect our modern and dynamic payments ecosystems.


So that is a quick review of some of the issues that the Payments System Board and the RBA staff have been focusing on recently. It is clear that payments is an increasingly exciting area and that significant innovation is occurring. This presents opportunities to deliver improved services to end users of the payments system as well as raising new questions for policymakers. The Bank very much appreciates the ongoing engagement we have with the industry as we jointly work towards better outcomes for the Australian community.

Gradual change seen in euro area payment behaviour

• Cash most popular instrument for in-person retail payments, but use gradually declining
• Card payments becoming increasingly contactless
• Survey suggests coronavirus pandemic has accelerated use of cashless payment methods
Euro area consumers are gradually shifting towards cards for in-person retail payments, although cash
remained the most used instrument at the end of 2019, data published today by the European Central
Bank (ECB) show.
Last year euro area adult consumers used cash for 73% of their point-of-sale and person-to-person
retail transactions (48% in value terms). In a previous ECB study conducted in 2016, the figure was
79% of these transactions (54% in value terms).
The use of cards for in-person retail payments increased by 5 percentage points over the same three
years, from 19% to 24% (41% in value terms). Almost four out of ten card transactions were made
using contactless technology in 2019.
For their online shopping, euro area adult consumers paid mainly by card (49% of transactions) and
one out of four online transactions was made using e-payment solutions. Four out of ten bill payments
were made using direct debit and two out of ten by credit transfer.
In order to understand the potential impact of the ongoing pandemic on consumers’ payment behaviour,
the ECB complemented its 2019 study with an ad hoc survey carried out in July 2020. Four out of ten
respondents replied that they had used cashless often since the start of the pandemic. While most of
those who fell into this category expected to continue to do so after the pandemic, the long-term impact
on payment behaviour is still uncertain.
“Consumers’ freedom to choose their payment method is of the utmost importance to us. Therefore we
aim to ensure acceptance of and access to cash throughout the euro area, while promoting innovation on digital payments, including in our work on the possible issuance of a digital euro,” said Executive
Board member Fabio Panetta.
The data published today will help the ECB and the national central banks of the euro area to better
understand consumer demand and market trends, as well as to implement the Eurosystem’s retail
payments and cash strategies. These include the promotion of competitive, innovative and resilient
pan-European market solutions, as well as a commitment to keep cash accessible and accepted as a
means of payment throughout the euro area.

The future of money – innovating while retaining trust

Article by Christine Lagarde, President of the ECB, in L’ENA hors les murs magazine

Paris, 30 November 2020

Important lessons can be drawn from the past to understand the factors influencing the journey towards the future of money, including the possible introduction of a digital euro. Ensuring the euro meets the needs of European citizens is at the core of the ECB’s mandate.

Throughout history, the nature of money has evolved in response to socioeconomic changes. But the functions of money – as a means of exchange, a unit of account and a store of value – have remained the same for centuries.

One reason why money first emerged was to overcome the limitations and inefficiencies of bartering. As economies became more specialised, trade became all the more essential, and a universal medium of exchange was needed to facilitate it. Coins made from (precious) metals fulfilled that purpose for centuries.

But with the development of international trade, coins became increasingly impractical because they are difficult to store and transport in large volumes.

This led to the next phase in the evolution of money through medieval times into the late middle ages and early modern times. Developments included the advent of Templar’s credit notes in France, private giro banking in Italy, bills of exchange and promissory notes, and the first predecessors of paper money.

Role of the public sector

All of these instruments foresaw convertibility into precious metal coins. The acceptance of these forms of dematerialised and easy-to-carry money depended on the reputation of the issuer, and credit risk became relevant.

This led to the public sector playing an increasingly important role in issuing money and ensuring its value remained stable. Examples include the emergence of early public giro banks at the beginning of the 15th century and the first attempts to issue modern banknotes in the second half of the 17th century.[1]

In today’s modern economies, including in the euro area, money is no longer convertible into, or backed by, any commodity. Fiat money, as it is known, serves as legal tender by decree of the government or even constitutional legislation (such as the EU Treaty[2]). The value of money is based on citizens’ trust in it being generally accepted for all forms of economic exchange and in the ability of central banks to maintain its purchasing power through monetary policy. Central banks’ institutional independence also bolsters their ability to maintain trust in money.

Since early modern times central banks have gradually been assuming an increasingly pivotal role in ensuring that money delivers on the three functions I outlined. They must be fully aware of and adapt to changing realities.

Technological progress

As we enter the digital age, the nature of money, but also of goods and services, is changing quickly. Digitalisation and technological advances are transforming all areas of society, accelerating the process of dematerialisation.

Non-cash payments continue to increase. In the euro area, over the last year the total number increased by 8.1% to 98 billion. Nearly half of these transactions were made by card, followed by credit transfers and direct debits.[3]

The coronavirus (COVID-19) pandemic has accelerated this trend towards digitalisation, with a surge in online payments and a shift towards contactless payments in shops.[4] Market participants expect payments to be the financial service that will be most affected by technological innovation and competition over the next five years, according to a survey conducted in 2019.[5]

To meet the demand for digital means of payment, new forms of private money (i.e. a liability of private entities) have emerged. They are available as commercial bank deposits which can be used for transfers and direct debits, and as electronic money through credit cards and mobile payment apps.

In the euro area, the Eurosystem’s supervision mechanisms ensure commercial banks and payment service providers are effective and safe. This enables people to continue to have confidence in private money, which remains an integral part of our financial system.

But central bank money in digital form is still not available for retail payments.

Digital euro

The ECB wants to ensure the euro remains fit for the digital era. Early this year, the Governing Council decided to explore the possibility of issuing of a digital euro – digital central bank money for retail payments, in other words.

The Eurosystem is assessing the implications of the potential introduction of a digital euro, which in legal terms would be a liability of the central bank. In October the ECB published the Report on a digital euro[6] and launched a public consultation[7].

But why issue a digital euro, if other forms of (private) digital money are already available?

Central bank money is unique. It provides people with unrestricted access to a simple, essentially risk-free and trusted means of payment they can use for any basic transaction. But for retail use it is currently only offered physically in the form of cash.

A digital euro would complement cash and ensure that consumers continue to have unrestricted access to central bank money in a form that meets their evolving digital payment needs.

It could be important in a range of future scenarios, from a decline in the use of cash to pre-empting the uptake of foreign digital currencies in the euro area. Issuing a digital euro might become necessary to ensure both continued access to central bank money and monetary sovereignty.

A properly designed digital euro would create synergies with the payments industry and enable the private sector to build new businesses based on digital euro-related services.

A digital euro would also be an emblem of the ongoing process of European integration and ultimately help to unify Europe’s digital economies.

Crypto-assets pose risks

But what about bitcoin or other crypto-assets that have been trying to gain a foothold in the digital payments space and to anchor trust in their technology?

Innovations like distributed ledger technology (DLT), in particular blockchain (which is at the core of crypto-assets such as bitcoin), bring both new opportunities and new risks.

Transactions between peers occur directly, with no need for a trusted third-party intermediary. The trust that is usually inherent in a transaction is replaced by cryptographic proofs and the security and integrity of records is ensured by DLT, which avoids the “double-spending” problem. Nevertheless, trust is not entirely dispensable.

The main risk lies in relying purely on technology and the flawed concept of there being no identifiable issuer or claim. This also means that users cannot rely on crypto-assets maintaining a stable value: they are highly volatile, illiquid and speculative, and so do not fulfil all the functions of money.[8]

Recently, we have seen the emergence of stablecoins, which try to solve crypto-assets’ problem of a lack of stability and trust by pegging their assets to stable and trusted fiat money issued by States.[9] And the issuers of “global” stablecoins, which target a global footprint, further aim to introduce their own payment schemes and clearing and settlement arrangements.[10]

Although stablecoins could drive additional innovation in payments and be well integrated into social media, trade and other platforms, they pose serious risks.

If widely adopted, they could threaten financial stability and monetary sovereignty. For instance, if the issuer cannot guarantee a fixed value or if they are perceived as being incapable of absorbing losses, a run could occur. Additionally, using stablecoins as a store of value could trigger a large shift of bank deposits to stablecoins, which may have an impact on banks’ operations and the transmission of monetary policy.[11]

Stablecoins, particularly those backed by global technology firms (the “big techs”), could also present risks to competitiveness and technological autonomy in Europe, as they would attempt to leverage their competitive advantage and control of large platforms. Their dominant positions may harm competition and consumer choice, and raise concerns over data privacy and the misuse of personal information.[12]

“Money is memory”

In general, end users prioritise ease of use and smooth integration with other apps or services, and therefore welcome new solutions in exchange for providing their personal data. Public authorities are open to innovation and are prepared to act as catalysts for change, while implementing appropriate policy measures to ensure this innovation helps consumers rather than hindering them.

Payment providers and their payment solutions must be subject to appropriate regulation and oversight – in accordance with the principle of “same business, same risks, same rules” – to protect users and safeguard the stability of the economy against new risks that even go beyond financial ones.

Some say that “money is memory”[13], and it seems that this memory is becoming increasingly digital. But consumers’ digital data and records must not be misused. The abuse of personal information for commercial or other purposes could endanger privacy and harm competition. These and other potential risks are being assessed by the Eurosystem and European institutions.

At the same time, public authorities must balance the benefits and risks of innovation in payments and be prepared to take a leading role in ensuring that payments remain efficient, safe and inclusive in the digital age.

As the economy continues to evolve and new expectations about the nature of money emerge, the Eurosystem must be ready to respond and ensure that European payments adapt to changing consumer preferences and remain inclusive and efficient.

Despite all the changes I have mentioned, the foundations of money remain intact. People accept money only if it is highly trusted, maintains its value and respects privacy – an aspect that is becoming increasingly important in the digital age. These foundations have been and will continue to be found in central bank money, irrespective of the form it takes in the future.[1]Bindseil, U. (2019), Central Banking before 1800: A Rehabilitation, Oxford University Press; Le Goff, J. (2010), Le Moyen Age et l’argent, Perrin.[2]Article 128(1) of the Treaty on the Functioning of the European Union.[3]ECB (2020), “Payments statistics: 2019”, 11 September.[4]ECB (2020), “Impact of the pandemic on cash trends (IMPACT)”, forthcoming.[5]Petralia, K., Philippon, T., Rice, T. and Véron, N. (2019), “Banking Disrupted? Financial Intermediation in an Era of Transformational Technology”, Geneva Reports on the World Economy, No 22, International Center for Monetary and Banking Studies and Centre for Economic Policy Research, 24 September.[6]ECB (2020), “Report on a digital euro”, October.[7]ECB (2020), “Public consultation on a digital euro: public consultation (questionnaire)”, October.[8]ECB Crypto Assets Task Force (2019), “Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures”, Occasional Paper Series, No 223, ECB, May.[9]ECB Crypto Assets Task Force (2020), “Stablecoins: Implications for monetary policy, financial stability, market infrastructure and payments, and banking supervision in the euro area”, Occasional Paper Series, No 247, ECB, September.[10]G7 Working Group on Stablecoins (2019), “Investigating the impact of global stablecoins”, October.[11]See footnote 9 and Panetta, F. (2020), “The two sides of the (stable)coin”, speech at Il Salone dei Pagamenti 2020, 4 November.[12]G7 Working Group on Stablecoins (2019), “Investigating the impact of global stablecoins”, October; Panetta, F. (2020), ibid.[13]Kocherlakota, N. (1998), “Money Is Memory”, Journal of Economic Theory, Vol. 81, No 2, pp. 232-251.

From the payments revolution to the reinvention of money

Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Deutsche Bundesbank conference on the “Future of Payments in Europe”

Frankfurt am Main, 27 November 2020

Retail payments play a fundamental role in our daily lives and for the economy. Last year, adults in the euro area made two payments per day on average.[1] The universe of retail transactions[2] amounted to 213 billion payments – two million every five minutes – with an estimated total value of €164 trillion.[3]

As part of its mission to promote the smooth operation of the payment system, the Eurosystem has two main objectives in the area of retail payments. The first is to guarantee that people have access to efficient payment solutions that meet their preferences. The second is to ensure that transactions remain safe, underpinning confidence in our currency and the functioning of our economy.

Technological innovation means that the policy implications of these objectives are changing, and new opportunities and risks are emerging. Today I will present the Eurosystem’s response: a strategy for empowering Europeans with efficient, inclusive and secure payments in the digital age. And I will argue that the impending revolution in payments requires us to stand ready to reinvent sovereign money.

Convenience and safety in the digital age – Payments

Payments have evolved substantially over time, but the key determinants of their success have remained fundamentally unchanged. People want payments that offer convenience and safety at a low cost. Convenience requires payments to be easy to use, fast and widely accepted, while safety requires low risk from an economic, financial and societal perspective.

The digital transformation is raising the bar for convenience and safety. With the growth of e-commerce and connected lifestyles, people are increasingly demanding immediacy and seamless integration between payments and digital services. At the same time, they are increasingly concerned about privacy, cybersecurity and reliability.

This wide range of desirable features creates scope for innovative payment solutions. Currently, none of the existing solutions – cash, cards, credit transfers, direct debits and e-money – meet all the required features at once. People are forced to use several instruments at the same time. In-person transactions[4] are mostly conducted with cash and cards.[5] Remote purchases are dominated by cards and e-payments.[6] And bills are generally paid using direct debits and credit transfers.[7]

The coronavirus (COVID-19) shock has accelerated the trend towards digitalisation, leading to a surge in online transactions and contactless payments in shops. This trend is likely to persist once the pandemic is over.[8] So we must ask ourselves whether the available means of payment adequately meet the needs of consumers in the digital age.

Cash offers a secure and inclusive way of making in-person payments, but it is not well suited for payments in a digital context, such as in e-commerce. So it is no surprise that it is being used less.[9] Payment cards, on the other hand,facilitate digital, contactless payments. But they are not accepted everywhere. And the Europe-wide acceptance of cards issued under national card schemes currently relies on agreements with international card schemes. As a result, people mostly use international schemes for cross-border card payments, and the European market for card payments is dominated by non-European schemes.

Generally, Europe is increasingly relying on foreign providers, with a high degree of market concentration in some segments, such as card transactions and online payments.[10]

We should not let this reliance turn into dependence. Dependence on foreign providers and excessive market concentration would harm competition, limiting the choice for consumers and exposing them to non-competitive pricing. It could reduce the resilience of the payment system and weaken the ability of European authorities to exercise controls.

We must ensure that the payment market remains open to competition, including from European suppliers and technology.

The influx of technology firms

Fintech companies have sparked the latest wave of innovation, accelerating the evolution of the payment system.[11] Many of them have adopted data-driven business models, where payment services are provided free of charge in exchange for personal data. Numerous banks are expanding their range of digital services by entering into agreements with fintechs; in some cases, integration is achieved when a bank acquires a fintech firm.

The global tech giants – the so-called big techs – are aiming for a revolution in the payments landscape, and represent a threat to traditional intermediation.[12] These firms can use data-driven models on an entirely new scale by leveraging their large customer base, real-time data and control of crucial infrastructures for commerce and economic activity – from online marketplaces to social media and mobile technologies. They can use these advantages, their financial strength and their global footprint to provide new payment solutions and expand in both domestic and cross-border transactions. This would offer them an even stronger base to further expand the range of their financial activities, including lending, as their superior ability to collect and analyse large volumes of data gives them an information advantage.

If not properly regulated, big techs may pose considerable risks from an economic and social perspective and they may restrict, rather than expand, consumer choice. They can aggravate the risk of personal information being misused for commercial or other purposes, jeopardising privacy and competition. And they can make the European payment market dependent on technologies designed and governed elsewhere, exacerbating its vulnerability to external disruption such as cyberattacks.

The big techs may also contribute to a rapid take-up, both domestically and across borders, of so-called stablecoins.[13] As I have argued previously[14], stablecoins raise concerns with regard to consumer protection and financial stability. In fact, the issuer of a stablecoin cannot guarantee the certainty of the value of the payment instrument it offers to consumers. Such a guarantee can only be provided by the central bank.

Moreover, unlike bank deposits, stablecoins do not benefit from deposit guarantee schemes, their holders cannot rely on the degree of scrutiny that is now the norm in banking supervision, and the issuers do not have access to central bank standing facilities. As a result, stablecoin users are likely to bear higher credit, market and liquidity risks, and the stablecoins themselves are vulnerable to runs[15], with potentially systemic implications[16].

These risks could be mitigated if the stablecoin issuer were able to invest its reserve assets[17] in the form of risk-free deposits at the central bank, as this would eliminate the investment risks that ultimately fall on the shoulders of stablecoin holders.[18]

This would not be acceptable, however, as it would be tantamount to outsourcing the provision of central bank money. It could endanger monetary sovereignty if, as a result, private money – the stablecoin – were to largely displace sovereign money as a means of payment. Money would then be reduced to a “club good” offered in return for the payment of a fee or membership of a platform.[19]

We should safeguard the role of sovereign money, a public good that central banks have been managing for centuries in the public interest and that should be available to all citizens to satisfy their need for safety.

Monetary sovereignty could also be threatened if foreign central bank digital currencies became widely used in the euro area, with implications for international monetary spillovers.[20]

These risks are not imminent. We must nonetheless be alert to possible non-linear developments that could endanger financial stability and monetary and economic sovereignty. As we aim to enhance the efficiency of European payments, we therefore need to be prepared to rethink the nature and the role of sovereign money.

The Eurosystem policy response

The Eurosystem is implementing a comprehensive policy to ensure that citizens’ payment needs are met, while safeguarding the integrity of the payment system and financial stability. Our policy is based on interconnected elements addressing the entire payment value chain.

First, we have enhanced our retail payments strategy, in order to foster competitive and innovative payments with a strong European presence. We are actively promoting pan-European initiatives that offer secure, cheap and widely accepted payment solutions.[21]

We are supporting access to bank accounts by non-bank providers, so that they can expand the range of payment initiation services they offer. Yesterday the Euro Retail Payments Board, chaired by the ECB, launched a work stream to facilitate this access. We are working to make the European e-identity and e-signature frameworks better suited for payments and the financial sector more broadly.

Our retail payments strategy also builds on the promotion of instant payments, which make funds immediately available to recipients. We have created a solid basis for instant payments, with commonly agreed rules and powerful infrastructures, including the TARGET Instant Payment Settlement (TIPS) service, operated by the Eurosystem. Thanks to the measures we have taken in recent months, all euro instant payment providers and infrastructures will have access to TIPS by the end of 2021.

Second, we are adapting our regulatory and oversight framework to the fast pace of financial and technological innovation. We have reviewed our Regulation on oversight requirements for systemically important payment systems[22], introducing a more forward-looking approach to identify payment systems that are systemically important. And today we are launching a public consultation on the new regulation, which will then become operational by mid-2021.

We are also completing the public consultation on our new framework for electronic payment instruments, schemes and arrangements, the so-called PISA framework. PISA extends our oversight[23] to digital payment tokens[24], including stablecoins, and to payment arrangements providing functionalities to end users of electronic payment instruments[25]. As a result, technology providers can become subject to oversight.

As part of our comprehensive policy, we are working to safeguard the role of sovereign money in the digital era: we want to be ready to introduce a digital euro, if needed.

A digital euro would combine the efficiency of a digital payment instrument with the safety of central bank money. It would complement cash, not replace it. Together, these two types of money would be available to all, offering greater choice and access to simple, costless ways of paying.

We have started a public consultation to seek feedback from people across Europe and gain a better understanding of their needs. It will be completed in January, and the results will be published once they have been analysed.

A digital euro would need to be carefully designed, in order to enhance privacy in digital payments[26], respect the rules on countering illegal activities and avoid interference with central bank policies, first and foremost monetary policy and financial stability.

In particular, a digital euro should be a means of payment, not a form of investment that competes with other financial instruments. This would require limiting the holdings of individual users[27] and mean that, unlike stablecoin issuers, the issuer of the digital euro – the ECB – would not aim to acquire deposits.

A digital euro would support the modernisation of the financial sector and the broader economy. It would be designed to be interoperable with private payment solutions and would thus represent the “raw material” that supervised intermediaries could use to offer pan-European, front-end payment solutions.

A digital euro would also generate synergies with other elements of our strategy, facilitating the digitalisation of information exchange in payments through e-invoices, e-receipts, e-identity and e-signature. And in making it easier for intermediaries to provide added value and advanced technological features at lower cost, it would give rise to products that could compete with those of the big techs, thereby benefiting end users.

The ECB and the national central banks have started preliminary experimentation through four work streams. First, we will test the compatibility between a digital euro and existing central bank settlement services (such as TIPS).[28] Second, we will explore the interconnection between decentralised technologies, such as distributed ledgers, and centralised systems. Third, we will investigate the use of payment-dedicated blockchains with electronic identity. And fourth, we will assess the functionalities of hardware devices that could enable offline transactions, guaranteeing privacy.[29]

We will take the necessary time to explore all aspects of different options: whether they are technically feasible, whether they comply with the principles and policy objectives of the Eurosystem, and whether they satisfy the needs of prospective users.


Let me conclude. The digital transformation is triggering a revolution in the financial sector, which will bring innovation but also risks. In particular, big techs and stablecoins could disrupt the European financial system. And while they could offer convenient and efficient payment solutions, they also risk endangering competition, privacy, financial stability and even monetary sovereignty.

Our policies provide a forceful policy reaction to the digital shock. We want to create the conditions for a resilient, innovative, diverse and competitive payments landscape that can better serve the evolving needs of European people and businesses. We are promoting safe, pan-European instant payments.

What is at stake is nothing short of the future of money. As private money goes digital, sovereign money also needs to be reinvented. This requires central bank money to remain available under all circumstances – in the form of cash, of course, but also potentially as a digital euro.

We want to enable people to choose their preferred way of paying without having to compromise on their expectations of fast, secure, inclusive and seamless payments. This is our aim today, and it will remain our aim in the future.

Ida Wolden Bache: Central bank digital currency (CBDC) and real-time payments

Speech by Ms Ida Wolden Bache, Deputy Governor of Norges Bank (Central Bank of Norway), at Finance Norway’s Payments Conference, 5 November 2020.


Thank you for the invitation to speak here today. For anyone interested in payment systems, this conference is an important meeting place – and that applies equally to this year’s conference, with its many digital participants.

The payments landscape in Norway is changing. Technological advances, user preferences and globalisation are strong driving forces for change, offering opportunities but also posing challenges:

How can we ensure the existence of an efficient system for payments in NOK while at the same time safeguarding security? How can we improve the common infrastructure for payment services? How can we best promote competition and innovation?

The private sector, organisations and authorities must together and individually work to further develop the payment system. Norges Bank is responsible for promoting an efficient and secure payment system. This is why we are now assessing whether there is a need for central bank digital currency and whether Norges Bank should expand its operational role in real-time payment settlement. This is the theme of my remarks here today.

A changing payments landscape

Changes in payment patterns have accelerated during the Covid-19 pandemic.

Norges Bank conducted a new payments survey three weeks ago. Only 4 percent of payments are now made using cash. This share is approximately the same as in spring, and considerably lower than before the pandemic. To our knowledge, the share of cash payments is lower in Norway than in any other country.

Contactless and PIN-less payments are increasing sharply. Three out of every four card payments are now contactless payments. An increasing number of smartphone apps can be used to make payments in shops. Online shopping is growing, and payment is increasingly made via smartphone apps and other digital wallets.

New payment methods are contributing to the efficiency of the payment system. Payment processes are being simplified. Payments are faster. These are positive developments. At the same time, the payments market is characterised by scale and network advantages. We must therefore be vigilant to developments whereby some operators – domestic or global – gain market power that weakens competition.

Global technology companies are involved in many parts of the payment system. Some companies such as Amazon, Apple and Facebook also control shopping and social network platforms, often offering services on the platform in competition with other operators. This allows these technology companies to regulate and restrict competition – including in the payments arena. There is a risk that users will be locked in and that the range of payment options will be reduced over time. Interoperability across systems and operators merits continued focus.

Big technology companies, or BigTechs, have so far offered services to end-users overlaid on top of traditional payment infrastructures. They can also have an interest in offering their own currency and payment systems. One example is Libra, backed by among others Facebook. Regulation of such systems will be important if we as a society are to secure the benefits of these new solutions while limiting the associated risks. The European Commission recently presented legislative proposals for an EU regulatory framework on crypto-assets as part of its digital finance package. As an EEA country, Norway will also be affected by this framework.

Globalisation is about more than BigTechs entering the payments market. Payment infrastructure providers are also undergoing structural changes. Global operators are taking positions in Norway and the Nordic region. Mastercard will be acquiring many of Nets’ services and will be an important provider for Norway’s payment system.

Central bank digital currency CBDC

Structural changes in the payment landscape raise questions around whether there is a need for Norges Bank to implement measures to ensure that payments can continue to be made efficiently and securely in NOK in the future. A central question is whether Norges Bank should provide central bank money to the public in digital as well as physical form.

Central bank digital currency – CBDC – will be both a new type of money and a new payment system. CBDC, like cash, is a claim on the central bank. In contrast, bank deposits are claims on private banks. CBDC raises some fundamental questions as to the role of central bank money. This is much more than a question of technology.

Norges Bank is not alone in assessing the need for central bank digital currency. Many central banks are engaged in similar research. Several are in the process of testing technical solutions. Both Sveriges Riksbank and the central bank of China launched pilot projects earlier this year. The European Central Bank (ECB) signalled last month that it was stepping up its research on a digital euro.

Central banks are considering introducing a CBDC for a variety of reasons. In emerging economies, the focus is on financial inclusion and low-cost payments. In advanced economies, the focus is more on the role of cash and the emergence of new monetary and payment systems.

A trend specific to Norway and some of our neighbouring countries is the low and falling level of cash use. Users increasingly choose solutions offering contactless payments and payments via smartphone apps. These solutions use bank deposits as the means of payment.                                                                           

At the same time, cash has some unique characteristics that could be important to preserve in the payment system of the future:

  • Cash is part of the contingency arrangements if the electronic contingency solutions fail.
  • Cash is a credit risk-free alternative to bank deposits and can promote competition in the payment market.
  • Cash is legal tender that is widely accessible.

These are characteristics that are important to society, but that the individual user does not necessarily prioritise in their choice of payment solution. The question is whether something important will be lost if cash dies out and we do not introduce CBDC? Is central bank money crucial to confidence in the monetary system? Could CBDC provide more than cash can offer, in the form of a greater range of uses and more innovation?

Declining cash use is not the only motivation for Norges Bank’s research into CBDC. The precautionary principle is also an important factor. We want to be prepared to be able to introduce a CBDC if the payment system develops in a different direction than we can foresee today.

We must take account of changes in the payment solutions offered, including different forms of money. Libra will not be the last initiative of this kind. We must also take structural changes in banks’ payment infrastructure into account. We must think through the effect these changes may have on competition, contingency solutions and national governance and control of the payment system. 

Norges Bank’s research has now been in progress for almost four years. The prospective introduction of a CBDC is still some way off. The lack of urgency reflects our view so far that there is no acute need to introduce a CBDC. The introduction of a CBDC could have considerable consequences in a number of areas. Our decision must be well-informed. Introducing a CBDC will involve such a substantial change in the monetary system that it will require a political decision. It could also involve the question of whether the Central Bank Act would have to be amended.

What is the current situation? Norges Bank’s research is now in a third phase, to be completed in the new year. We are working on specifying the features a CBDC should have and considering a range of technical solutions. We are also drawing on other central banks’ experience and plans. Possible strategies for testing and experimenting with technological solutions are also being assessed.

The core of a prospective CBDC system will be controlled by Norges Bank. Banks and other third parties could provide end-user services. This is a natural division of roles. Norges Bank would facilitate innovation through the design of the system’s technical core and regulatory framework.

The consequences a CBDC could have for the financial system depend entirely on its design. The design could influence which claims the public decide to replace with CBDC and on what scale. If CBDC replaces cash, banks’ balance sheets will not be affected – the public will simply replace one claim on the central bank with another. If the public replaces bank deposits with CBDC, the consequences for the financial system could be more severe. Banks’ access to deposit funding could be reduced and banks’ funding costs could rise.

During a financial crisis or other situations of high uncertainty, the public can suddenly withdraw bank deposits. Such bank runs can lead to instability in the financial system. We have not observed such movements in Norwegian banks’ funding for a long time. Both the bank guarantee scheme and banks’ strong financial position have likely played an important role here. With the introduction of CBDC, digital bank runs might occur more easily and with greater speed. Avoiding digital bank runs are therefore an important factor to consider when designing CBDC.

In addition to assessing the consequences of the introduction of CBDC, we must also analyse the consequences of a payment system without central bank money. We must ask ourselves whether we can maintain confidence in the monetary system and achieve the goal of an efficient and secure payment system using instruments other than introducing a CBDC. We do not have the answer yet.

Norges Bank will decide how the Bank will proceed with its work on CBDC in the first half of next year. We want to be transparent about our work. Three reports have been published so far, and there are plans to publish another report early next year. We hope that this will provide inspiration for continued dialogue with and contributions from a broad set of stakeholders. And already next week – on 9 November – we will be hosting an open webinar about the project.  

Further to my remarks on CBDC, I would also like to comment briefly on the central bank money we already have, namely cash. In order to fulfil its functions in the payment system and contribute to efficiency, it is important that cash is both available and easy to use, ie that the public has real opportunities to obtain and use cash. Norges Bank will continue to issue cash and work to facilitate its use as long as this is appropriate and cost-effective for society.

Real-time payments

A common infrastructure can be regarded as a collective good that benefits us all. Payment solutions should therefore build on a common underlying infrastructure that is secure and fast and operates at low cost. Providers can then compete freely for customers through various applications and interfaces.

Norwegian banks have traditionally agreed on good common solutions for the payment system infrastructure, but owing to developments in technology and market structure in recent years, payment services have increasingly become a competitive arena. Customer contact through payment services has gained increased strategic importance for banks and other providers. At the same time, this may have weakened incentives to develop common solutions.

Real-time payments are payments where funds are available in the payee’s account within seconds of payment initiation – 24/7. A well-functioning solution for real-time payments is an important part of an efficient payment system. We expect the share of real-time payments to increase in the years ahead.

Norway’s banking sector established a common infrastructure for real-time payments (called “Straks”) in 2013. The solution had some shortcomings and it took many years before it was adopted by several of the larger banks. An improved solution, called “Straks 2.0”, was introduced in 2020 and is used by all the banks. Straks 2.0 is a clear advance on the previous solution. Before Straks 2.0, the payee’s account was credited before interbank settlement had been completed. The payee’s bank ran the risk that the funds from the payer’s bank might not arrive as agreed. For all practical purposes, this risk has now been removed, with liquidity set aside at the central bank to guarantee settlement.

Although the removal of settlement risk is a positive step, this is not enough. The real-time payment infrastructure must be further developed. Today, real-time payments are made almost exclusively between private individuals, through Vipps and online banking. The infrastructure must better facilitate payments for businesses and the public sector. It must also allow for more innovation of services on top of this infrastructure. Solutions both in the infrastructure and in banks must be established in line with international messaging standards.

Like several other central banks, Norges Bank is considering whether to expand its role as payment system operator. We are now exploring whether real-time payments should be settled directly in Norges Bank. This would give us greater opportunities to influence developments.

Two alternatives for real-time settlement in Norges Bank are being considered. The first alternative is to establish a system whereby Norges Bank is itself responsible for management, development and operation. The second is to join the Eurosystem’s TIPS solution. Payments would then be settled in TIPS in NOK on behalf of Norges Bank. Sveriges Riksbank decided to join TIPS earlier this year.

Norges Bank’s research will continue for a few more months before we decide whether to pursue one of these alternatives. If we reject both, we will continue to work for better real-time payments under the current division of responsibility with the banking industry. Irrespective of which solution we choose, the system for real-time payments must be efficient and secure, facilitate innovation and competition, and ensure satisfactory national governance and control. 

We conduct our research in dialogue with the industry and relevant government bodies. It is important to Norges Bank that affected parties support the chosen solution. For society to secure the benefits, we need market participants that develop payment services based on a common infrastructure.

The introduction of ISO 20022, a global messaging standard, is important for both real-time payments and the payment system as a whole. A standard whereby different solutions throughout the whole value chain “speak the same language” offers considerable advantages. Projects are now in progress, both in the industry and Norges Bank, to replace legacy national standards and formats with ISO 20022. Solid plans have been made – now it is up to all the affected parties to contribute to implementation.

Technological advances – innovation and security

Innovation and competition improve payment system efficiency, with solutions that are better adapted to society’s needs.

So far, I have mainly spoken about domestic payments, but innovation is also transforming payment systems across borders and currencies. For example, the SWIFT Global Payment Initiative has contributed to faster and more transparent cross-border payments. However, a large proportion of cross-border payments do not go through SWIFT. Cross-border payments are generally expensive, slow and opaque. The services offered are not of the same standard as for domestic payments.

The challenges have long been highlighted by international organisations, but implementing changes has proved demanding. The G20 and the Financial Stability Board (FSB) are behind a new and forceful initiative. The FSB has identified measures and recently published a roadmap for their implementation. I hope that this can be a breakthrough in the work to improve cross-border payments.

Furthermore, I would like to mention that the Bank for International Settlements (BIS) is in the process of establishing BIS Innovation Hub Centres in many parts of the world. Their primary purpose is to promote insight into financial technology that can strengthen the financial system. One such hub centre is being established in Stockholm, with the central banks of Sweden and Denmark, Sveriges Riksbank and Danmarks Nationalbank, the Central Bank of Iceland and Norges Bank as participating banks, in addition to the BIS.

New technology provides new opportunities for innovation, but also presents new risks that must be addressed. Vulnerability to technology-enabled disruption is increasing – whether the disruption is the result of malicious attacks or other factors. As the use of digital solutions increases, attack surfaces expand. Cyber attacks have increased during the pandemic. A successful attack can result in users being unable to make payments, heavy financial losses and sensitive information falling into the wrong hands. The entire financial system can be affected.

Norges Bank will, in cooperation with Finanstilsynet (Financial Supervisory Authority of Norway), draw up a proposal for a framework for testing the cyber resilience of the banking and payment system in Norway. This will build on the TIBER-EU framework, which has been developed by the ECB. The aim is to enhance the cyber resilience of the financial sector and promote financial stability. The national framework will be designed in cooperation with the industry and relevant authorities.


Let me conclude. Private individuals, firms and the economy as a whole depend on an efficient, reliable and secure payment system, which Norway largely has today. But there is more to be done.

We must constantly be on the lookout for ways to make improvements. Many of you participating in this conference are likely already working on this. Norges Bank is particularly focused on improving the common infrastructure for payment services, which will provide a solid foundation for competition, innovation and security in the payments market. Our ambition is to contribute in making a sound Norwegian payment system even better, in dialogue and collaboration with the industry.

Digital Transformation – Digital Leadership

Digital Transformation – Digital Leadershipby Casper Tribler


Casper Tribler – Experienced Telecom Prof.

Our ability to digitally transform companies, governments, healthcare, education, legal systems, law enforcement, communication, finance etc. are pushing forward new digital strategies and increased focus on digital leadership. Such leadership is required across all levels of the horizontal and vertical organizational grid, and across all age groups. The current workforce wants to work for businesses that are digital ambitious, and being a digital risk taker is becoming a necessity for employees to stay attractive as well as organizations to stay competitive within their core activity.

To stay competitive as an employee and an organization Digital Transformation has to be an integrated part of who we are and what we do.

A study presented by Deloitte explains that employees want to work for digital leaders, and across the age groups from 22 to 60 the vast majority of respondents want to work for digitally enabled organizations. 4 Leaders need to bear this in mind in order to attract and retain the best talent needed to transform their digital strategy into digital reality. Many leaders tend to believe that Digital Transformation is driven by technology, but it could not be further from the truth; as Cap Gemini explains it:

Digital transformation is first and foremost a business transformation. People, not technology, are the most important piece in the Digital Transformation puzzle. 1

What is Digital Transformation?

For some Digital Transformation is just another term that is used with increased frequency these days together with other trendy terms such as Disruptive Innovation, Internet of Things, Data Lakes, Machine Learning, SMAC, Code Halos etc.

I have heard the term Digital Transformation described in a rich variety of ways by my industry colleagues within IT and Telecom, and it is evident that Digital Transformation means different things to different people. Some describe Digital Transformation as creating a digital culture centered around a strong brand idea, or that it is about getting a company to be more digital native, acquire new skills and capabilities to be data driven and ultimately more customer centric, and some refer to the concept of ‘going paperless’, or that Digital Transformation changes companies so they can take advantage of new opportunities and face the challenges from the technical world. My response to these definitions are that Digital Transformation is all that and much more. However, this leaves us with a rather illusive concept and it would be quite helpful if we had a more defined understanding of Digital Transformation.

From studying various publications, I managed to put together below definition that I would like to share with you:

Digital Transformation

Strategically embrace new digital innovations enhancing the customer experience


  • Strategic: Ever evolving strategic exercise promoted by the relevant leadership, which are then required to be translated into clearly defined tactical and operational goals ensuring long-term commitment and ongoing momentum.
  • New digital innovations: Move the organization forward compared to its current digital capabilities enabling new types of innovation and creativity in a particular domain, rather than simply enhance, support and rely on existing technologies. The transformation is focused on digital initiatives and integrations within the organization, such as for example Internet of Things, or social, mobile, analytics and cloud (SMAC) and other underlying IT architectures such as big data, Data Lakes etc.
  • Customer experience: Ensure that the overall goal from the Digital Transformation is to deliver an enhanced customer experience having a positive impact on the organization’s performance for example on its revenue, profit, share price etc.

What drives digital leadership?

The persistent evolution of technology is a source of constant inspiration to redefine the way we exist (co-exist) as a species. Digital Transformation has become the ultimate challenge in change management because it impacts not only organizational structures and strategic positioning, but all levels of society (every task, activity, process).

Leaders must constantly challenge their organizations to ensure that this technology-enabled change can unlock productivity gains and competitive advantages, and understand where and how the fundamentals of their current operations could be unsettled by agile new entrants or new business models.

Today’s leaders need insights to validate strategic and tactical decisions quickly, which requires access to large volumes of data, from an increasing number of different information channels and preferably real-time. As a consequence, leaders are becoming more personally involved in generating their own tailor-made insights rather than simply reading a pre-canned report or analysis. And if you are an ambitious leader that likes to be in control of your own destiny, what better way to reach such enlightenment than spearheading the Digital Transformation of your organization?

What is digital leadership?

This may come as a surprise to some people; Digital Transformation does not demand mastery of the technologies. Instead, it requires commercial leadership to articulate the value of digital technologies as a critical part of the organization’s future. 4

The success of Digital Transformation is greatly dependent on the organization’s ability to commercialize its digital strategy.

Digital leaders are more likely to have a data-driven mentality when it comes to decision making rather than taking what is presented at face value; these digital leaders has a need to verify their commercial decisions through analyses: 5





Further to the argument that the core success driver to Digital Transformation is not technology nor technological mastery, is supported by Aberdeen Group’s study from October 2015 stating that digital leaders are:

  • 73% more likely to have strong analytical knowledge within non-technical roles.
  • 65% more likely to have processes in place for defining and communicating business needs for analytics.
  • 38% more likely to have policies and/or tools in place for governing end-user access to data.

Successful digital leaders also understand that to get maximum ROI out of investing into Digital Transformation they have to push their organizations to accelerate the flow of information between departments, and make that information available more quickly and more broadly across the organization. In more concrete terms this means creating an environment that nurtures data-driven insight thinking, implementing clear user needs and strong policies for data governance, support more efficient decision-making processes delivering relevant capabilities to the right job roles at the right time. These are all characteristics that digital leaders foster within their organization ultimately building the foundation for lower risk, increased profitability and faster management decisions.

Why should leaders take digital seriously?

Today’s most critical decisions not only rest on the business feel and gut instinct of our leaders, but to a greater extend requires convincing insights. The involvement of data may once have been purely supporting or affirming in nature, but now plays a more central role. Even shareholders are depending more heavily on a data-driven mindsets to drive their investments forward and Digital Transformation has the tools they need to achieve their vision.

If leaders wish to stay relevant in the future adopting digital risk-taking and formulating digital strategies – if not already – will become the norm. So if leaders are not motivated by the incredible opportunities Digital Transformation in itself offers, then keeping once own job might just do the trick. Digital Transformation is here to stay and the sooner leaders get to terms with this fact the better as they will be able to take advantage from enhanced knowledge sharing, improved process efficiency, revenue growth and increased profit as findings show from Aberdeen Group study in October 2015:



Digital Transformation is here to stay

Digital Transformation is a never ending endeavor and in these disruptive times we live in the frequency of formulating new digital strategies and adopting new technologies is only expected to increase. Our future leaders must embrace Digital Transformation as their mission, and define and deliver winning digital strategies.



As many leaders have already started their organization’s digital exploration, those who has yet to begin need to take this development seriously. The sooner they transform themselves into digital leaders and start their own Digital Transformation journey, the less catching up they have to do and the more relevant they will become to their shareholders, management and employees going forward.



More information, questions or comments




Thank you for reading this article “Digital Transformation – Digital Leadership”. Please visit me on LinkedIn to find my previous articles covering Big Data (RoI and Big Data), Data Lakes (Introduction | How does it work? | Risk Management – Part 1 | Risk Management – Part 2), Predictive Analytics, Internet of Things, Customer Insight Analytics (Part 1: Introduction | Part 2: Solutions | Part 3:  Implementation | Part 4: Conclusion), and more: LINK

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 Special thanks

Special thanks to below sources of inspiration and references:

  1. https://www.capgemini-consulting.com/digital-transformation
  2. https://econsultancy.com/training/digital-transformation/
  3. https://youtu.be/2q_lWLm5qtg
  4. “Strategy, not Technology, Drives Digital Transformation”. MIT Sloan Management Review. Retrieved 2016-01-18. Deloitte University Press
  5. THE ANALYTICAL EXECUTIVE: GETTING THEIR HANDS DIRTY WITH DATA, October, 2015 by Michael Lock from Aberdeen Group
  6. IBM Podcast. How to build a highly collaborative and data-driven organization. https://itunes.apple.com/us/podcast/ibm-analytics-insights-podcasts/id605818735?mt=2&i=366448947


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