Global Trends in Large-Value Payments

23 Pages Posted: 9 Jun 2008

See all articles by Morten L. Bech

Morten L. Bech

Bank for International Settlements (BIS) - Committee on Payments and Market Infrastructures

Christine Preisig

Federal Reserve Banks - Federal Reserve Bank of New York

Kimmo Soramaki

European Central Bank (ECB)

Date Written: September 2008

Abstract

Globalization and technological innovation are two major forces affecting the financial system and its infrastructure. Perhaps nowhere are these trends more apparent than in the internationalization and automation of payments. While the effects of globalization and technological innovation are most obvious on retail payments, the influence is equally impressive on wholesale, or interbank, payments. Given the importance of payments and settlement systems to the smooth operation and resiliency of the financial system, it is important to understand the potential consequences of these developments. This article presents ten major long-range trends in the settlement of large-value payments worldwide. The trends are driven by technological innovation, structural changes in banking, and the evolution of central bank policies. The authors observe that banks, to balance risks and costs more effectively, are increasingly making large-value payments in real-time systems with advanced liquidity-management and liquidity-saving mechanisms. Moreover, banks are settling a larger number of foreign currencies directly in their home country by using offshore systems and settling a greater number of foreign exchange transactions in Continuous Linked Settlement Bank or through payment-versus-payment mechanisms in other systems. The study also shows that the service level of systems is improving, through enhancements such as longer operating hours and standardized risk management practices that adhere to common standards, while transaction fees are decreasing. Payments settled in large-value payments systems are more numerous, but on average of smaller value. Furthermore, the overall nominal total value of large-value payments is increasing, although the real value is declining.

Keywords: large-value payments systems, real-time gross settlement, hybrid payments systems, offshore systems, cross-border systems, CLS Bank, technological innovation, structural change in banking, central bank policies

JEL Classification: E58, O33

Suggested Citation

Bech, Morten L. and Preisig, Christine and Soramaki, Kimmo, Global Trends in Large-Value Payments (September 2008). Economic Policy Review, Vol. 14, No. 2, September 2008, Available at SSRN: https://ssrn.com/abstract=1141387 or http://dx.doi.org/10.2139/ssrn.1141387

Morten L. Bech (Contact Author)

Bank for International Settlements (BIS) - Committee on Payments and Market Infrastructures ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland
41612808923 (Phone)

Christine Preisig

Federal Reserve Banks - Federal Reserve Bank of New York

33 Liberty Street
New York, NY 10045
United States

Kimmo Soramaki

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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