Growing complexity and risk in payment systems

Release date
11 November 2014

Rapid change in payment systems, both globally and in New Zealand, is creating innovative new services and reducing costs for users - but is also leading to greater risk.

"The ability to make payments conveniently and safely is vital to the financial system and broader economy," Reserve Bank Deputy Governor Grant Spencer said today to a Payments New Zealand conference.

"The payments industry landscape is changing faster than ever, with innovation driven by technology, customer expectations and, in the case of large wholesale systems, international regulatory developments.

"Just 30 years ago, payments were overwhelmingly made using cash and cheques. Now, the majority of payments are made electronically. Current growth areas include contactless payments, mobile phone applications and on-line payments. We are also seeing many new providers of payment services, including telecommunications companies and the likes of Apple, Google and Paypal.

"Most major countries have moved since the global financial crisis to strengthen the regulatory oversight of payment systems, with an emphasis on large ‘systemic' payment systems. Internationally developed regulatory principles have been widely adopted, including by New Zealand.

The Bank is looking to strengthen its oversight regime in order to better apply the principles to large payment systems. At the same time, New Zealand's oversight regime will remain relatively low intensity.

"The Reserve Bank does not seek to prescribe the shape of the payments system or the direction of innovation. Nor do we want to force cooperative ‘utility' solutions on the industry which could inhibit innovation and competition,"

"However, it is important that the industry have an effective high level governance structure, such as Payments New Zealand, which can facilitate competition and innovation, while also ensuring the integrity of the system and its participants." Mr Spencer said.

Read the speech: Reserve Bank perspective on payments

Media Contact:
Angus Barclay, Communications Adviser
Phone (04) 471 3698 or 027 337 1102, angus.barclay@rbnz.govt.nz