The changing financial system: From paper to paperless – Beragampengetahuan

Cecilia Skingsley, Head of the BIS Innovation Hub in this speech points to the changing financial system:

The first change is from paper assets to paperless assets:

We are entering a world where nothing we own, or for that matter owe, is on paper. It sits in accounts, databases, perhaps the cloud. Most of us carry very little or no cash anymore. Instead, we keep our money in a bank account ready to be used with cards, apps and smartwatches. We are also probably the last generation to go to a bank branch regularly.

The second change is in financial firms:

For a long time, the financial system was based on two well known parts: the public and the private sector.

The public sector is, of course, first and foremost in charge of providing money for the economy. It is also responsible for regulating and supervising financial sector actors. And it has often been engaged in operating critical financial infrastructure, sometimes owning it. As we know, central banks originated from settlement organisations.

The private sector, in the form of banks, insurers, asset managers etc, had the broad task of allocating credit to the economy and handling all interactions with customers.

Now, things have become a bit more complicated, especially in the private sector.

Users increasingly expect financial services to be available 24/7, like other digital services. Also, households and small business are making more cross-border transactions, whether for tourism or e-commerce. While they lack the scale of multinationals, governments and banks, they rightly expect faster and cheaper services too.

And, on the supply side, there are also important structural changes. Big tech and fintech companies are challenging the established companies, and the crypto/DeFi cluster aims to scale their services too.

We usually think it is a positive thing when competition and innovation shake up economic sectors that might have grown complacent. But now we are talking about vital public goods, essential for the proper functioning of every society.

What do these changes mean? More in the speech.

This entry was posted on October 30, 2023 at 12:12 pm and is filed under Academic research & research papers, Central Banks / Monetary Policy, Economics – macro, micro etc, Financial Markets/ Finance. You can follow any responses to this entry through the RSS 2.0 feed.
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