Economic activity would have been lower and unemployment – particularly youth unemployment – higher. This would have had a disproportionately higher impact on the incomes of the poor and the young. At the same time, inflation would have been lower, which research shows transfers wealth from younger households to older households, who are more likely to be savers.3 So the ECB not acting also carried distributional implications. Further, the deeper and more prolonged recession would likely bring about greater hysteresis, depressing future growth and hence returns for savers. Overall, households would have been worse off had the ECB not acted. Counterfactual discussions aside, how have households fared across the euro area? To gauge the effect on different euro area households, we can draw upon results from the Eurosystem’s Household Finance and Consumption Survey (HCFS), conducted in 2010 and 2014. Even though these surveys do not cover the period since the introduction of the negative deposit facility rate, they do coincide with declines of 2-year euro area benchmark bond yields by 130 basis points and 10-year bonds by 110 basis points. Euro area net financial income as a fraction of total household income fell slightly. When looking more closely at households grouped by wealth quintiles, we find that households with the lowest net wealth, whose debt payments are higher than their financial income, had an unchanged position. Households with the highest net wealth, whose financial income is much higher than their debt, had the most marked fall in income.

If not managed well, cross-border differences may hamper efforts to support bilateral or regional integration, such as where local payment companies look to expand or integrate to enable crossborder connectivity. Shifting market expectations is the third key challenge, which can lead to a gap between customer demand and payment services available. Consumers today are increasingly used to on-demand services that are instant and seamless. To this end, retail payments are making good progress – increasingly, more countries have developed real-time payment infrastructure that support instant peer-to-peer (P2P) payments. However, the same experience is increasingly expected – but not necessarily delivered – for other segments, such as in consumer-to-business (C2B) and business-to-business (B2B) payments. Gaps also remain on the cross-border front in terms of speed, transparency and cost. The growing complexity and depth of global financial markets, such as in securities and derivatives markets, also has implications on large value payment systems. Financial institutions and large corporates are gradually facing more difficulties in handling multiple types of financial instruments across multiple jurisdictions and across multiple functions within their organisations. Perhaps there may be demand going forward for payment systems to support greater sophistication in user functionality, such as liquidity optimisation facilities for banks and automated treasury services for corporate clients. Keeping in mind these challenges, a few questions come to mind. First, what is the appropriate role for regulators when it comes to digital innovation in payments?