Anita Angelovska Bezhoska: Payments in the digital era - inside out
Speech by Ms Anita Angelovska Bezhoska, Governor of the National Bank of the Republic of
North Macedonia, at the 13th Conference on Payments and Market Infrastructures, jointly
organised by the National Bank of North Macedonia and the Netherlands Bank, Ohrid (digitally), 9
December 2021.
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Dear Governor Knot, Minister Besimi,
Dear speakers and participants
It is my great pleasure to welcome you to our traditional conference on Payments in the Digital
Era: Inside Out, hosted by our central bank together with the Dutch Central Bank, for which I
express my deep gratitude to governor Knot and his colleagues.
Our lives are becoming increasingly digital as a result of the proliferation of new technologies
that transform public and private services making them more convenient and accessible to
consumers. As our lives have gone digital, so have our payments.
The digitalisation of consumer payment behaviour, which has been going on for years, has been
accelerated by the pandemics that shifted it in a higher gear. Globally, last year cash payments
declined by 16%, while the number of non-cash transactions increased by 6%. The pandemics
has particularly accelerated the shift towards real time/instant payments that grew by 40%. In the
1
euro area, according to the ECB survey on payment attitudes (2020) , 40% of the respondents
stated that since the onset of the pandemic they have used less cash and more cards
(contactless in particular).
The main reasons for changing payment habits include the increased convenience of the
electronic payments, for example increased limit on the amount of contactless payments, the
perceived risk of infection from banknotes, governments' recommendations to use cash less, as
well as more difficult access to and lower acceptance of cash at the points of sale. This trend in
payments is unlikely to be reversed. Almost 90% of the respondents stated that they would
continue to use cash less once the pandemic is over.
Similar trends in payment habits can be observed in our country as well. Consumers have
shown strong preferences for using cashless instruments such as cards. For example, the
number of payment transactions initiated on the virtual point of sale last year doubled and
continued to raise at double-digit growth rates this year. Also, the volume of contactless card
payments increased by about 50% in 2020 and this trend has continued this year.
Obviously, advancement in technology opens the doors to innovative digital services, but to
unlock its true value for businesses and consumers, we as regulators have a role to play. In this
context, clear example is the Payment Services Directive 2 (PSD2) that opened up EU payments
market to higher competition, by establishing a level playing field for traditional players and new
entrants, while providing higher protection for consumers. The new concept of open banking was
conducive to richer payment landscape with numerous new entrants (third party providers) and
numerous new customer-centric services. Thus, payments enabled by new providers have just
started to take off, but it looks promising to become a new normal as they are expected to
improve the user experience. How fast this segment of the financial system in the EU is
developing can be witnessed by the approximately 300 new providers operating by
midSeptember this year, which is just two years since the application of the new regulation-relevant
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regulatory technical standards under the PSD2 (Open Banking Report, 2021 ).
Most of the companies that offer these innovative services are fintechs, but open banking also
offers a possibility for traditional banks. In fact the survey conducted by Accenture finds that
three quarters (75%) of the banks see payments modernization as being driven by changes in
the national payments infrastructure and regulation, which include improving bank-to-bank
payments systems, new industry standards and open banking. The rapid move to digital
payments has put additional pressure on banks, with three-quarters (75%) of bank executives
saying that the pandemic has increased the urgency of their plans to modernize payment
systems.
Pressures are felt by the central banks as well. In response to changes in consumer payments
preferences, the need to further increase efficiency of payments, as well as the disruption
caused by COVID-19, the interest in central bank digital currency (CBDC) has also increased. In
fact, last year was the launch of the first "live" digital currency in the Bahamas. A recent BIS
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survey of central banks found that 86% were actively researching the potential for CBDCs, 60%
were experimenting with the technology and 14% were already deploying pilot projects. The
central bank digital money, intended to be digital equivalent to cash, could further increase
consumer choice, competition and accessibility with regard to digital payments, thus supporting
financial inclusion and making cross-border payments faster and cheaper. In addition, some
central banks see the preservation of monetary sovereignty in case of widespread use of crypto
assets (issued by private entities) as a motivation factor.
However, central banks are also exploring possible side effects of digital currency. For example,
the risk of financial disintermediation as households and businesses can chose between holding
accounts with commercial banks or central bank, or the increased run risk in case of distress, as
there will be readily available safe assets, hence endangering the financial and monetary stability.
Therefore, it is crucial that digital currency meets public demand, contains possible risks and
ensures that payments landscape remains competitive.
How do we as a central bank embrace evolving challenges in the payments area? Two years
ago, we established an Innovation Hub aiming to facilitate, encourage and support financial
innovation. We find this communication channel very useful for both the fintech and the National
Bank. We help new players to better understand the existing regulation, and in turn, they help us
discover potential regulatory gaps. Furthermore, last year we conducted a survey to landscape
the development of the fintech sector and to assess the opportunities and barriers for innovation.
The results of the survey indicate that about 90% of all respondents are aware of the benefits that
digitalization of financial services brings, about 70% invest in digital transformation, payment
services in particular, while regulation and market size seem to be the two main obstacles for
faster fintech development. Regulatory barriers mainly refer to data protection, money laundering
and payment system areas. The latter will be addressed with the new Law on Payment Services
and Payment Systems that transposes the European regulation in the payments area, including
PSD2. The Survey has served as a base point for the preparation of the first National Fintech
Strategy to be adopted at the begging of next year. We expect that the new regulatory framework
and more broadly, the implementation of the Strategy, will bring and make the new "inside out" for
the Macedonian payment industry.
Apparently, the digital age is propelling innovations in the financial area and changing profoundly
the habits and preferences of consumers. I have no doubt that these innovation waves will
continue. To maximize benefits and contain risks that might come to the surface, regulators,
including central banks have to be part of the innovation waves to meet consumers' needs in the
payments landscape of tomorrow.
I am very glad that this conference will shed light on these and many other relevant matters, so I
eagerly look forward to the presentations and discussions of the participants.
I wish all of you an enjoyable and rewarding virtual conference.
Thank you!
1
www.ecb.europa.eu/pub/pdf/other/ecb.spacereport202012~bb2038bbb6.
2
Open Banking Report 2021 - Open Finance and the Race for Relevance and New Business Models in
Banking, The Paypers BV.
3
newsroom.accenture.com/news/covid-19-increases-urgency-for-banks-to-transform-payment-systems-as-
digital-payments-soar-finds-research-from-accenture.htm
4
www.bis.org/about/bisih/topics/cbdc.htm