08 June 2015

BIS / Liikanen: Enhancing reliability and efficiency of future payments - five criteria

Speech by Mr Erkki Liikanen, Governor of the Bank of Finland, presenting five criteria which should serve as guiding principles when assessing the present payment systems and the future developments.

These criteria are: 1) technical efficiency, 2) accessibility and non-discrimination, 3) efficient and cost-based pricing, 4) operational stability with contingency plans in case of problems, and 5) international compatibility.

These criteria should not be considered as something that is imposed upon the payment method providers; they are an essential building block of any sound business case within the field of payment services.

Mr. Liikanen emphasizes that even in the future, the five criteria for a payment system remain essential. In other words, technical efficiency, accessibility and non-discrimination, efficient and cost-based pricing, operational stability with contingency plans in case of problems, and international compatibility are still important for developing new payment systems.

The key challenge for developers is how to solve the trilemma between usability, costs and security of a payment method. The competitors in this future payment race are likely to come from different directions and their solutions can be very different.

Since payment methods are part of payment networks, no payment service is isolated from the real world and other financial transactions. The competition-cooperation nexus needs to be taken into account to enable faster adaptation of innovative solutions without compromising security, but also to maintain and foster competition between providers of such payment services. The end-user benefit and transparency are the key points here.

Authorities need to be able to monitor the development and usage of new payment services, keeping in mind the proportionality principle. This means that it is not in the interest of authorities to suppress innovation; new entrants should have a fair chance to be able to enter into the market. Nevertheless, safety of the payments must be ensured in all cases.

The economics of payment networks are highly complex, so there is a need for continued research in the field. Academic papers and discussion in this conference have shed light on many important aspects that should be taken into account in relation to future payments.

Full speech

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