Later on, merchants invented payment instruments, including promissory notes and cheques; and, in the 17th century, the first privately issued banknotes emerged in Europe. 3 These innovations significantly reduced the transport costs involved in making payments and simultaneously improved security. On my slide, this is the second phase: the transition from coins with intrinsic value to promissory notes, cheques and privately issued banknotes. 1 2 3  As reproduced in Rudolf Richter (1990), Geldtheorie – Vorlesung auf der Grundlage der Allgemeinen Gleichgewichtstheorie und der Institutionenökonomik, Berlin, pp. 120 et seq. Specifically: electrum, a naturally occurring alloy of gold and silver. The existence of paper money in China dates back to the 10th century. In Europe, the first banknotes were issued in 1661 in Stockholm. In Switzerland, the first banknote was put into circulation in Berne in 1826. Page 3/9  Central banks play a fundamental role in payment systems Now, it is important to remember that neither the promissory notes nor the cheques – nor even the banknotes – of this era were actual money, but merely a claim on money. Such instruments could not be used to settle payment obligations with finality. There was always a risk that the borrower would not have enough precious metal to honour the payment obligation on the due date. The use of payment promises in trade thus entailed substantial credit and liquidity risk. These risks could undermine confidence in payment instruments, bringing trade to a standstill. And this, ladies and gentlemen, is where central banks enter the equation.
Central banks can reduce payment-related risks very effectively. By establishing security and confidence, they contribute decisively to the efficiency of the payment system. Today, money changes hands mainly via transfers or direct debits, with payments being booked directly to the commercial banks’ accounts at the central bank. Settling in electronic central bank money is equivalent to settling in cash; it is final and irrevocable. This approach reduces credit risk and inspires confidence – both in the payment system and in money itself. On the slide, this is the third phase: the transition from private promises to pay to central bank money – in other words, to today’s banknotes and the electronic sight deposits that commercial banks hold with their central bank. RTGS systems – a milestone in the evolution of cashless payments Let us now turn to Switzerland. For many years, the postal cheque service of Swiss Post was at the heart of the cashless payment system. This area only began to become attractive for banks as well from the middle of the 20th century. Around this time, so-called ‘bank clearing’ – Switzerland’s first interbank payment system – came into existence. This was an important step in the development of the cashless payment system. However, the predominantly manual nature of the system made it cumbersome. It could take up to four days to execute a payment, making efficient liquidity management virtually impossible for the participating banks. Furthermore, in the ‘bank clearing’ system, payments were settled on a net basis.