Innovations in retail payments

Over the past decade, a number of innovative developments in retail payments have emerged. Many central banks take an interest in retail payments as part of their role in maintaining the stability and efficiency of the financial system and preserving confidence in their currencies. Although most retail payment systems are not considered systemically important, their potential weaknesses with regard to security and reliability could nonetheless affect the financial system and the economy. Innovations in retail payments can therefore raise policy issues for central banks.

In June 2010, the Committee on Payment and Settlement Systems (CPSS) set up a working group to investigate developments in retail payments, focusing especially on innovations. This report, produced by that group, first provides an overview of innovative retail payment activities in the CPSS and other selected countries from a fact-finding exercise, which attempted to cover influential developments in retail payment instruments and schemes over the past decade. Based on the trends observed and the economics of retail payments, the report identifies a number of exogenous and endogenous factors that could serve as drivers for retail payment innovations or as barriers to them. The analysis was also used to suggest some pointers as to what can be expected over the next five years. Finally, the report identifies a number of issues for central banks concerning their various responsibilities and tasks as catalysts, overseers and/or operators of payment systems.