Central banks may need to step up collection of statistical data on new developments in retail payments to help them carry out analytical research, says a new Bank for International Settlements (BIS) report which warns that failure to assess the market properly and offer correct guidance will see them face a reputational hit.
The BIS Committee on Payment and Settlement Systems (CPSS) 'innovations in retail payments' report covers 122 innovations reported by 30 central banks over the last year in a bid to get an overview of the market.
Covering five categories - card, Internet, Mobile, electronic bill presentment and payment, and infrastructure and security - the report concludes that the retail payments market is dynamic but only a few innovations have had a significant effect in recent years.
Where big strides have been made, financial inclusion has been a major driving force, as have non-banks using innovative technologies.
User demand is probably the most important driver for innovation, says the report, since it is the basis for a valid business case. The regulatory framework is also an important influence, with many regulators seeking to foster competition in the payments market by easing the requirements.
Over the next five years, the CPSS predicts that technical developments are likely to blur product categories as access devices and channels are becoming interchangeable. NFC and the continued rise e-commerce are both cited as big factors in the near future.
For central banks, monitoring and assessment of new developments is important and they may be required to step up efforts to collect statistical data, to do analytical research and to ensure the availability of appropriate skills.
Communication of their work and policies is needed to ensure transparency and to provide guidance to the market, with reputational damage a risk if guidance is inadequate.
Innovations also raise new questions on standardisation and interoperability, which most central banks promote and facilitate. Says the report: "For central banks, the challenge may be to find an appropriate level of involvement in these activities."
In addition: "As innovations emerge and markets develop, the banks face the challenge of reviewing their existing oversight frameworks and might need to seek cooperation with other authorities both nationally and internationally, not least in view of the growing role of non-banks and global providers."
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