of each transaction. what i have just described, is economic theory, the ideal world. in reality, of course, integration and innovation are not as smooth. integration, for example, may require compromise, and comes with adjustment costs. there is a silver lining, though, as adjustment to new technologies also presents opportunities to renew the infrastructure and do away with legacy. network effects and economies of scale may also result in concentration. while concentration can offer efficiency benefits, there is a risk that the resulting market power will be misused. apart from the two - way causality, integration is not the only driver for innovations in payments. there are several other possible drivers. in 2012, the bank for international settlements ( bis ) published an in - depth report on the matter. it was based on an analysis of over 120 innovations reported by 30 central banks. the report distinguished a number of exogenous and endogenous factors that could serve as either a driver or barrier for retail payments innovations. the report revealed that the two main endogenous factors are cooperation and standardization, which we have already discussed. the three key exogenous factors are, not surprisingly, technological developments, regulation, which we have also dealt with, and user behavior and user demand. the report suggested that user demand may even be the most important driver for innovation, since it forms the basis for a valid business case for suppliers. it is ultimately the users, normal people and businesses, who determine an innovation ’ s success. what is then role of central banks in payments innovation? this role is, in my view, two or threefold. central banks can monitor and assess the relevant developments. it is also up to them to give some guidance to markets, explain what their policy objectives are, and help foster public awareness of specific issues, like security. and last but not least, they can also facilitate new developments, particularly if changes are needed in settlement procedures, which is their natural domain. trends in retail payments although the bis paper was published five years ago, i think its findings are still highly relevant, and indicate what we can expect in terms of retail payments innovation. the report identified a number of trends. first, the market is dynamic, so although there are many new developments in payments, only a few survive. second, most innovations are developed for the domestic market, and not many have international reach. similar types and categories of innovations were reported in many countries, although the exact functionalities differed according to domestic market conditions

drivers of european payments integration : innovation and cooperation op 7 juli 2017 sprak klaas knot over samenwerking en innovatie in het betalingsverkeer, op het tienjarig jubileumcongres over het europees betalingsverkeer drivers of european payments integration : innovation and cooperation ohrid, republic of macedonia, 7 july 2017 ladies and gentlemen, first of all, i would like to thank the organizers of this conference for inviting me to speak in this beautiful location. the beauty of ohrid and its lake is already well known to us in the netherlands, mainly through the books of a. den doolaard. there is even a monument to the dutch author here in the city. while i was out jogging this morning i was able to admire the lake ’ s beauty for myself. however, i ’ m not just here for the scenery, but also for this conference of course. this event is already in its tenth year, which is reason to celebrate! it is the result of fruitful cooperation between the national bank of the republic of macedonia, banco de portugal and de nederlandsche bank. over the past decade, the conference has become a meeting place for central bank officials from the region and beyond. it provides an ideal platform to exchange knowledge and experiences on a wide range of important issues affecting the payments industry. and the theme of this year ’ s conference could not be timelier. i will start by reflecting on european integration and cooperation, before discussing two specific innovations in the payments industry. european integration so let ’ s begin with the issue of european integration. it means, put simply, removing, or at least lowering, borders between countries for people, goods, services and capital. the basic idea is to enlarge markets. this results in increased competition, which generates economic growth and prosperity. now, you may know what some say about european integration : ‘ two steps forward, one step back. ’ however, this metaphor has been used to describe political integration in the eu. i do not believe it applies to economic integration. with the obvious exception of brexit, economic integration in europe is progressing at a constant rate – and it is undoubtedly very successful considering the steady growth in prosperity. european economic integration can entail coordination or even unification of economic policies. a prime example of this is the emu, which establishes a common monetary policy for the euro area. even when policies are not aligned, economic integration is still