Many other central banks are now considering upgrading their payment systems. Payment flows now... Historically there has been a differentiation between large-value and smaller payment, also known as retail payments. The large-value payments include payments between the banks’ major customers, international payments, payments to and from financial infrastructures and the Riksbank's own transactions. This type of payment is often large, time-critical and settled one by one in RIX according to the principle of “first in, first out”.5 Retail payments are the millions of smaller everyday payments made between households, companies and authorities, for instance card payments in the retail trade, wage payments, pensions and normal payment of invoices. Retail payments that are not settled directly are normally first compiled and aggregated by a clearing house (in Sweden by Bankgirot) and then settled in RIX according to a predetermined timetable, this is also known as batch clearing. However, this regime is now being disrupted as technology has reached such a level of maturity that it is possible to send small payments without clearing to reach the recipient in the space of seconds. At the Riksbank we call this type of payment an instant payment.6 This is often called “swishing” in popular speech, after the mobile app used to make the payment. Swish has really taken Sweden by storm and is one reason why the use of cash is declining here.7 Today around 70 per cent of the Swedish population has access to the app and in 2018 almost 400 million instant payments were made with it.
The institutions that take part in the Riksbank's payment system can then pay by moving money, on behalf of themselves or their clients, between the participants’ accounts. When central bank money is used in a transaction, an asset with counterparty risk is converted into a safe and liquid claim on the central bank. Central bank money is safer than other money, as a central bank can always meet its obligations in domestic currency. It is important for financial institutions to be able to pay in central bank money, as they would otherwise be burdened with counterparty exposures when paying.2 Central bank money and the possibility to make safe payments are thus closely linked. The Riksbank needs to adapt its payment system so that the infrastructure remains safe and cost-efficient as technology develops and the payment market is changing. A growing trend both in Sweden and abroad is that households and companies expect to make payments at any time they like. The payment system we offer today therefore needs to be supplemented with a new system that is open 24 hours a day and adapted to the instant settlement of large volumes of payments. My assessment is that the best way for the Riksbank to attain this target is to make the Swedish krona available on the same technical platform as the European Central Bank (ECB) and the Eurosystem use.3 By taking advantage of the economies of scale that arise here, the right conditions are created for cutting transaction costs for Swedish households and companies.