The digital transformation of the retail payments ecosystem


we live in times of substantial changes. We all use digital technology for a lot of actions in society we have digital orders of goods and commodities and we use digital means of payments. The changes are dramatically fast and it is very proper that we start a dialogue between central banks and authorities with the academia and with private payments have always been a very relevant issue in the exchange of goods and services complex issue made of institutions, intermediaries, rules and we have questions that need to be answered what we want to do at European level is to avoid fragmentation that you could use your payment wherever you are and wherever you buy that means that throughout Europe within 10 seconds you can make sure that if you buy something the payments is being done. Our objective is to respect the choice of the citizen and the consumer. If the consumer prefers to have other means of payments we will also offer the consumer to use those means of payments, but the consumer must always be aware that there are private means of payments and there are public means of payments. A banknote has the guarantee of the central bank technological innovation adds a lot of complexity: new actors, new services, new distribution channels new technological standards so I mean this is really a very complex world and this is the reason why regulators have to be there they cannot be in their office by looking at the market from outside the Bank of Italy is monitoring very carefully the development of the FinTech world. We just took an initiative last week for opening a sort of space that we called FinTech channel where the new operators can deliver their projects and we also provide them with information regarding the evolution of the international and national legislation so basically the ECB together with a national central banks the euro system and the Governing Council have three main role in this. We can act as catalysts and we did it. We work together with the market to develop schemes to develop processes together with the market and the solutions. We also do it as a eventually provider of services so we are going to roll out new services to allow fluid payments all over Europe so TIPS is one of them and Banca d’Italia is one of the key provider there with its technology and we are very happy of that and also as overseer we are looking at that way this is happening is safe and efficient digital economy is without frontiers so it means we have to find also solution which is better and which allows fluidity of payments as a new economy is emerging and Europe should be a key player there and develop its own solution so yes we have common denominator to play together with users and this is happening in the dialogue we have we could see it very well today in the conference being from different region of the world in each of our panels talking about instant payments in Japan we have a concrete plan to implement 24/7 services in October next year so we are committed to providing high quality services to Japanese households and businesses in real time I’ve worked in the payments business for over thirty years in the u.s. There’s never been a time that’s been more volatile and more exciting than today’s environment with all of those topics you just mentioned. So the idea with our work effort was to discuss with the industry initially in the US whether or not we needed a faster payment system, a system that would be improved versus what we have today. The outcome of all that discussion was yes we do need an improved payment system and we can effect some change that will be good for our country yes I think the main drivers are the technological development, the changing user demands, regulation and also competition but we should not forget payments are not an end in itself, they have to react on developments in the economy Central banks also have to change the issue of a culture cultural change must also be taken up by the central banks and we should not forget central banks must understand what is going on SEPA credit transfer instant scheme was launched by the EPC last 21st of November and the signals of that launch are very positive so here we are to celebrate the launch and also that some Italian banks are among those pioneering the adoption of the scheme and processing SCT instant transactions so that I think is something to celebrate the major innovation of this frame law has been for example the possibility of having other means of payments instead of the common credit transfer or let’s say the cards which have been innovation before I’m sure that the future will be the competition between technologies but must be clarified between the solution to apply the blockchain approach and the Mr. Micali’s proposal was a new view about how to show some weakness of the blockchain as Bitcoin apply and but also in the panelists we have some insight that give us that the future is not the competition between virtual currencies we start with looking at the virtual currency but we move during the technology and I think this is a way for us as a regulator surely let’s discuss the algorand approach and its advantages on the weakness of the Bitcoin traditional approach and a main advantage is somewhat low cost of operations and a second advantage is of a greater security for adversary also attack the Network and not only they try to manipulate the blocks themselves. The third advantage is the finality of payments, the fourth one is that Bitcoin in my view is on paper a decentralized platform but in reality is very much centralized so the research issues of distributed ledger technologies is combining efficiency with a true decentralization. I really think that these issues of scalability are key because it’s very easy to be efficient if you are centralized. Nothing beats more centralized system because everything at your fingertips you are the only one responsible you can actually be very fast. When you are obliged to interact with a lot of players you have a lot more security because there is no single point of failure even two three four point of failure in a truly distributed system is highly secure but the real challenge is to make sure to combine the security of a decentralized system with the efficiency of a centralized one digital transformation is modifying the economic system and society in general at unprecedented speed. The benefits for users are enormous and new business opportunities are emerging but digital innovation is also creating new risks it creates opportunities for cyber crimes. These risks mean that disruptions may spread instantly and globally at with unprecedented effects. Recent cyber attacks such as the one against the Central Bank of Bangladesh were a wake-up call for financial authorities. In order to deal with emerging cyber risks effectively central banks and financial authorities in general must adopt a new approach. It is essential that regulatory and supervisory tools are accompanied by concrete action. A useful example of such strategy is the cooperation on cyber security promoted by Banca d’Italia together with the Italian banking association at the beginning of 2017 the Italian financial cybersecurity unit, the so-called CERTfin, was set up to centralize and disseminate information sharing and cyber threat intelligence to its participants such as banks, market infrastructures and outsourcers

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