Shaping the future of payments: BIS Quarterly Review

The BIS Quarterly Review takes an in-depth look at the fast-changing world of payments, explaining the strengths and weaknesses of existing systems, describing the rapid pace of technological change and its impact, and assessing new solutions.

Thanks to the speed of changes and the potential for disruption, payment systems have shot to the top of policymakers' agendas. The BIS and central banks have a leading role in shaping policymakers' response to these changes.

"Central banks have a core role in payment systems, and the changes under way require them to step up and play a more significant part in improving the safety and efficiency of these systems," Agustín Carstens, BIS General Manager, wrote in the introduction to this special edition of the Quarterly. "Money and payment systems are founded on trust in the currency - whether cash or digital - and this trust is something that only the central bank can ensure", he added.

In the overview of market developments covering the three months to late February, the March BIS Quarterly Review:

• Recounts how the late 2019 upswing in market sentiment faltered amid unease over the impact of the Covid-19 outbreak.
• Notes that the sell-off was uneven across asset classes and regions, affecting countries with close geographical or economic links to China more than others.
• Investigates the economic impact of the coronavirus outbreak by comparing it with the SARS epidemic of early 2003 in terms of their relative effects on stock markets around the world.
• Discusses the rapid expansion and future direction of private credit, which is the provision of loans to small, less creditworthy firms by non-bank intermediaries, and highlights similarities with the better known leveraged loan market.

Five feature articles analyse innovations in payment systems: 

• Morten Bech and Jenny Hancock (BIS) explore how technological advances are making domestic payments safer, faster and cheaper, but many people still lack access to them, especially in emerging market and developing economies. They also analyse why cross-border payments are improving more slowly.
• Tara Rice, Goetz von Peter and Codruta Boar (BIS) examine why the number of cross-border correspondent banks shrank almost 20% between 2011 and 2018. Banks retreated more from countries where governance and controls on illicit finance were poor and less where economic and trade growth were high.
• Morten Bech, Umar Faruqui and Takeshi Shirakami (BIS) show how payments across borders and currencies can be made faster, cheaper and more transparent by linking domestic systems, allowing banks from abroad remote access, or building dedicated systems.
• Morten Bech, Jenny Hancock, Tara Rice and Amber Wadsworth (BIS) investigate how digital disruption, and tokenisation in particular, might transform securities clearing and settlement. They also look at the results of experimental projects by central banks and financial institutions.
• Raphael Auer (BIS) and Rainer Böhme (University of Innsbruck) describe how a trusted and widely usable retail central bank digital currency (CBDC) must be secure and accessible, offer cash-like convenience and safeguard privacy. They consider the extent to which various technical designs satisfy these criteria and analyse the trade-offs involved.