Policy issues for central banks in retail payments

The Committee on Payment and Settlement Systems (CPSS) is today publishing the report Policy issues for central banks in retail payments. An earlier version was issued in September last year as a consultation document. The comments received during the consultation period have led to a number of minor, clarificatory amendments in the final version.

The report was prepared for the CPSS by its Working Group on Retail Payment Systems, which comprises payment system experts from the central banks of each of the G10 countries, the Reserve Bank of Australia and the European Central Bank. The report describes the varied ways in which these central banks are involved in retail payments.

The importance of the efficient and safe use of money as a medium of exchange in retail transactions is highlighted by the report as an essential function of the currency upon which people's trust is based. Retail payment systems and instruments are also significant contributors to the broader effectiveness and stability of the financial system, in particular to consumer confidence and the functioning of commerce. For these reasons, the efficiency and safety of retail payments are of interest to central banks.

The report identifies current trends in the markets for consumer and lower-value commercial payments and explores related policy issues for central banks. It puts forward four public policy goals for maintaining and promoting efficiency and safety in these markets, relating to: (i) the legal and regulatory framework, (ii) market structure and performance, (iii) standards and infrastructure and (iv) central bank services. Furthermore, it considers the contribution of central banks towards furthering these goals and identifies a range of possible actions. Recommended minimum actions emphasise the importance of market monitoring and of a cooperative and advisory approach by central banks towards both private and public sectors.

Central bankers share the view that market mechanisms should be the primary engine for achieving and maintaining efficiency and safety in retail payments. However, they acknowledge that the market may encounter persistent impediments that prevent appropriately efficient and safe outcomes in every case.