Driving Forces for Innovations in Payment Systems

Driving Forces for Innovations in Payment Systems

DOI: 10.4018/978-1-61520-645-2.ch007
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Abstract

Fourth, the progress of Information Technology (IT) also played a critical role. Enhanced computer capacity, improved communication networks and reduced technology cost contributed greatly to the innovation of payment systems.
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Rapid Growth Of Settlement Values And Settlement Risks

Fast-Growing Settlement Values

First, the settlement values of payment systems in industrialized countries have increased at a very rapid pace, which has been higher than that of economic growth. Figure 1 shows the settlement values of payment systems in eleven developed countries and the euro area (from 1999). This chart tells us that the settlement amount became more than double during the past fifteen years. The progress in globalization and liberalization of financial transactions has had a direct impact on the drastic increase on settlement amounts.

Figure 1.

Settlement values of selected payment systems (Source: statistics on payment and settlement systems in selected countries, BIS, each year)

Settlement Values Relative to Nominal GDP

Table 1 and Figure 2 show the settlement values of payment systems relative to the nominal GDP in thirteen industrialized countries. In most countries, this ratio is between 40 and 100 times1 the annual nominal GDP (see Table 1 and Figure 2). The average ratio is 75.3 times in 2007.

Table 1.
Settlement values of payment systems relative to nominal GDP (As of 2007) --- Times
CountryPayment SystemSettlement values relative to Nominal GDP 1
BelgiumELLIPS79.5
CanadaLVTS30.0
FranceTBF76.7
PNS8.6
GermanyRTGSplus95.9
Hong KongHKD CHATS134.2
ItalyBIREL27.4
JapanBOJ-NET57.2
FXYCS10.9
NetherlandsTOP68.9
SingaporeMEPS62.8
SwedenRIX 248.9 4
SwitzerlandSIC102.1
UKCHAPS 365.9 4
USFedwire48.6
CHIPS35.2
Total---75.3

Note1: Settlement value (annual) / Nominal GDP (annual)

Note2: RIX = K-RIX + E-RIX

Note3: CHAPS = CHAPS Sterling + CHAPS Euro

Note4: Sweden and UK are figures of 2006.

Source: BIS (2009)

Figure 2.

Settlement values of payment systems relative to nominal GDP (As of 2007) Source: BIS (2009)

This fact means that a one-week settlement amount of a payment system is larger than the annual nominal GDP of the nation. In other words, a payment system settles the nominal amount of annual GDP in only three or four days. With this knowledge in mind, you can imagine the tremendous social impact there would be if there were to be a malfunction with a payment system. It is needless to say that larger settlement values are accompanied with larger settlement risk.

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