Collaboration will be key to the future of payments, new OMFIF report reveals
Two-thirds of central banks believe they could or should explore direct collaboration with the private sector in designing and managing payment system architectures as digital currencies look set to transform financial services, according to a landmark report published by OMFIF today.
The pace of change in global payments is unprecedented. The desire for speed, convenience, safety and affordability in conducting digital transactions has been turbocharged by the need to preserve public health and reduce cash dependence during the Covid-19 pandemic. One central bank survey respondent reported that 1.6m individuals gained access to their country’s formal banking system during the first half of 2020, while mobile banking transactions rose 192% during the same period.
Regulators understand that they need to keep pace with these innovations to protect consumers. According to the OMFIF survey of central banks:
- 75% of respondents find payment systems governance a key function of the state, with 56% also seeing a greater future role for public-private partnerships in payments.
- 94% of respondents identify setting revised regulatory or technical standards as an essential responsibility of the state in the future payment industry.
- 82% of respondents select cybersecurity as a key regulatory concern in the proliferation of new payment technologies.
- 71% of respondents highlight that digital payment infrastructure should have measures that safeguard consumer privacy while balancing financial integrity and transparency requirements.
- Only 35% see industry fragmentation as a pressing regulatory concern.
The report looks in detail at the next evolution of payments. It examines how the advent of cryptocurrencies and distributed ledger technologies has spurred a wave of research and exploration by governments and central banks. The report showcases the potential for new paths forward by investigating the changing payments landscape through a regulatory lens. It also explores innovative developments underway in the ecosystem of traditional payment providers, technology companies and more recent entrants to the sector.
Apart from the roll-out of retail payment systems that offer near-instantaneous domestic clearing and settlement, there is potential for changes in how central banks can promote better speed, security and access to payments.
Consideration of central bank digital currency implementation and the notion of digital sovereign fiat currency that can be virtually transferred at low cost and speed are sparking further changes that could transform how transactions are executed. As both private and public sector innovations in payments develop, there is a need for regulatory modernisation in governing and evaluating the implications of novel payment infrastructures and instruments.
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