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Payments industry challenged to step up the innovation

Stakeholders in the New Zealand payments industry have been challenged to step up to ensure the country does not fall further behind in advancing our money and payments landscape at the risk of international innovation challenging New Zealand’s interests.

“My overarching message is that we are all working and living in a period of substantive change - one that offers enormous opportunity if embraced, and potentially greater risk if it is not,” said Karen Silk, Assistant Governor at the Reserve Bank of New Zealand – Te Pūtea Matua speaking at the Payments NZ “The Point” conference in Auckland this morning.

“We do not yet have scalable electronic, instant, peer-to-peer payments, and our lack of real time systems for retail payments positions us as an outlier amongst OECD countries. This slow pace of implementing promising developments is an issue for our economy, because we could become more digitally competitive, including by nurturing our home-grown fintechs in this space. And, as a society, we may see significant benefit through increased domestic competition and efficiency savings in the payment space and in the wider financial system.

“We can all do better: lingering reliance on legacy systems, failure to understand regulatory impetus and focus, and limitations in the co-ordination and provision of regulatory support for innovation are inhibiting real progress,” said Ms Silk.

Ms Silk pointed to recent law changes, financial regulators’ determination to provide a one-stop shop for financial technology (fintech) firms, and system level work to improve cross-border payments and get domestic inter-bank payments working 7 days a week as positive steps.

However, she also saw challenges arising from new players “unwittingly” introducing design or technology risks, avoiding New Zealand regulation, or undermining the role of central bank money whether cash or a possible Central Bank Digital Currency (CBDC) which the Reserve Bank continues to research.

The Reserve Bank today published a paper describing the current state of the New Zealand payments system, and it will publish another early next month consulting through until March 2023 on the potential need to regulate private cryptoassets.

Meanwhile, Ms Silk said the Reserve Bank remained committed to improving efficiency and resilience in the cash system to ensure it continued to give choice in payments for everyone, along with financial and social inclusion for those that rely on it. It was planning small live experiments next year looking at different ways to expand the role of merchants in the cash system.

“This could include supporting merchants to recycle cash at point-of-sale; remunerating them for cash out services; facilitating frequent, affordable cash delivery and collection for merchants; and consolidation within the cash system with the creation of utility entities,” said Ms Silk.

More information

Read Karen Silk's speech

Read our Bulletin article on New Zealand's payment landscape

Find out about the future of money