The Federal Reserve Bank of New York today released Global Trends in Large-Value Payments—a new forthcoming article in the Bank’s Economic Policy Review series.
Globalization and technological innovation are two of the most pervasive forces affecting the financial system and its infrastructure. Given the importance of payments and settlement systems to the smooth operation and resiliency of the financial system, stakeholders need to understand the evolving landscape in which payments systems operate. Authors Morten L. Bech, Christine Preisig and Kimmo Soramäki offer an in-depth look at the current environment for large-value payments systems (LVPSs). They describe trends common to LVPSs around the world and identify three key drivers of these trends.
Technological innovation, structural changes in banking and the evolution of central bank policies are the main forces behind global trends in LVPSs, according to the authors.
Technological innovation is making LVPSs safer and more efficient while allowing for new systems that are not limited to one country or currency.
Structural changes in banking—such as immense growth in the financial sector, changes in the role of firms and their products, and greater globalization of financial institutions and their services—are influencing the use of LVPSs. These changes are resulting in increasing settlement values and volumes, shrinking average payment sizes and a falling number of LVPS participants.
Evolving central bank policies are enabling central banks to become more active in monitoring existing and planned systems, assessing systems according to international standards and inducing change. Central banks’ growing involvement in payments systems has led to the adoption of common standards to improve risk management and enhance service levels, for example, in the form of longer operating hours and lower transaction costs.
Bech, Preisig and Soramäki also note the relevance of each of these trends to the future of the LVPS landscape and potential new developments.
Morten L. Bech is a senior economist at the Federal Reserve Bank of New York; Christine Preisig is a former senior policy expert at the Bank; Kimmo Soramäki is a Ph.D. candidate at Helsinki University of Technology on leave from the European Central Bank.
Contact: Andrew Williams