Jarle Bergo: Efficiency in the Norwegian payment system Speech by Mr Jarle Bergo, Deputy Governor of Norges Bank (Central Bank of Norway), at the Conference on payment systems 2002, Oslo, 14 November 2002. The text below may differ slightly from the actual presentation. *  *  *  Thank you for your invitation and for the opportunity to present Norges Bank’s views on developments in the payment system at this important conference where payment system experts are gathered. In particular, I will discuss issues related to efficiency in the Norwegian payment system today. This is an area in which our political authorities have delegated a responsibility to Norges Bank. Section 1 of the Norges Bank Act from 1985 states that “…Norges Bank shall promote an efficient payment system domestically as well as vis-à-vis other countries…”  1. An efficient payment system • Payments should be processed –Fast –At reasonable cost –Safely  • These three features receive different emphasis in the retail payment system and the interbank payment system  We have defined an efficient payment system as a system that settles payments quickly, safely and at reasonable cost. This definition applies to both interbank and retail payment systems. These three elements receive different emphasis depending on the type of payment involved. In connection with interbank systems, we place considerable emphasis on safety, because delays or failure of a payment settlement may lead to a liquidity shortage or loss in some banks.
Direct pricing for payment services is much more widespread in Norwegian banks than in banks in most other countries. The price of the services is charged per transaction to the payer and the public may choose the services that cover their needs at the lowest possible price. Since the Act relating to Financial Agreements came into force on 1 July 2000, the float in the Norwegian payment system has been removed. Prices that reflect the relative differences in production costs have had a positive affect on efficiency in the payment system. The economic impact is so substantial that it is visible in the national accounts. The revised national accounts show that GDP growth and productivity growth in the 1990s have been considerably stronger than assumed earlier. The new figures show that annual productivity growth for mainland Norway was 2.4 per cent in the 1990s. Financial services, with annual productivity growth of 6.3 per cent in the 1990s, is the sector that contributed most to this increase. This contributed 0.2 percentage point of the rise in productivity for mainland Norway. This is partly because of a general increase in efficiency after the banking crisis, but is also because of sharp productivity growth in the payment system. The productivity growth is a result of more cost-effective production of various services as well as increased use of payment services with low production costs. As a result of banks’ direct pricing of payment services, the most cost-effective services have shown the strongest growth.