BIS Review 118/2007  1  Financial intermediation The payments system is the backbone of a country’s monetary and financial system and it plays a critical role in a country’s economic development. It is through the payments system that money goes around. It allows money to be transferred between savers and lenders, buyers and sellers or from one point to another.
By reforming and developing the payments system, it is possible to reduce the overall transaction costs and improve the efficiency of financial transactions in an economy. And these efficiency, convenience and security have favourable flow- on effects to the whole economy. The central bank inevitably plays a key role in this payment process.