cecilia skingsley : are non - banks reshaping the retail payments market? speech by ms cecilia skingsley, deputy governor of the sveriges riksbank, at the conference “ non - banks in payment market : challenges and opportunities ”, organised by the bank of lithuania and the sveriges riksbank, vilnius, 8 october 2015. * * * the retail payments market is undergoing a structural change, potentially unparalleled with anything we have seen in a long time. this gives rise to a number of important questions as regards competition and cooperation, regulation and where this development may take us in the long run. an interesting and important market the retail payments market is an interesting and important market. important because it underpins the modern economy. if we were unable to pay in a safe and efficient way, the economy would soon grind to a halt when markets for goods and services stopped functioning. interesting because of its rapid development. it is here the action is. on a global level, the payments market has grown by some 8 per cent a year for a decade. growth has been higher not only in the developing world, reflecting overall higher economic growth rates, but also in europe and north america, where it has been some four per cent annually. given the financial crisis and the relatively low economic growth, this is a healthy growth rate. on a global level, estimates indicates that the retail payments market is worth several hundred us billions in revenue from transactions. if we add account - related revenues and interest rate and penalty fees from credit cards, the figures increase further. with this growth rate and potential revenue, it is no wonder that the retail payments market attracts so much attention. there are other factors that help explain why so much has happened over the last few years and that continue to drive the development. the rapid techno - logical development of smartphones, tablets, and high - speed internet connection is one of the most important factors. today, approximately half of all adults in the world have a smartphone and this share is likely to increase significantly. some 40 percent of the global population use internet. this technology is widespread and accessible at a reasonable cost and it has changed the way we shop. we purchase goods and services in new ways and because of this we also demand payment services that are suited to this new type of interaction. e - commerce is the prime example. this year some 38 billion e - commerce transactions will take place. we interact with e - merchants who we have no

##ated from the ( then ) 2. 5 % target by more than one percentage point. as ed balls commented in a lecture in 2001 4 : “ inflation targeting : a new framework for monetary policy? ”, ben bernanke and frederic mishkin, journal of economic perspectives, 1997. “ constrained discretion and monetary policy ”, remarks by ben bernanke before the money marketeers of ny university, new york, february 2003. “ delivering economic stability ”, oxford business alumni annual lecture by ed balls, june 2001. “ some have assumed it [ the requirement to write an open letter ] exists for the chancellor to discipline the mpc if inflation goes outside the target range. in fact the opposite is true … … in the face of a supply - shock, such as a big jump in the oil price, which pushed inflation way off target, the mpc could only get inflation back to 2. 5 per cent quickly through a draconian interest rate response – at the expense of stability, growth and jobs. any sensible monetary policymaker would want a more measured and stability - oriented strategy to get inflation back to target. and it is the open letter system which both allows that more sensible approach to be explained by the mpc and allows the chancellor publicly to endorse it. ” constrained discretion also provides much needed room for learning. monetary policy remains more art than science, and its practice is riven with uncertainties and risks. as the present governor put it in a lecture delivered in 1997 5 : ‘ inflation targets are a practical response to the fact that knowledge increases over time. ’ so a framework of constrained discretion combines much needed scope to implement policy flexibly, in the light of both circumstances and experience, with the credibility benefits of committing policymakers to secure a pre - determined outcome for inflation. that, in essence, was the key difference from the failed experiments of the past. the development of the mpc the mpc got off to a good start. it inherited an inflation rate that had been low for the past 5 years. and the financial markets welcomed it by reducing the risk premia on uk assets. no one had very clear expectations about how it would behave or how it might think. while it inherited some technical features of the previous regime, the new committee had quite a lot of scope to define its own operating procedures and intellectual framework. if not a blank sheet of paper, it was a book with many pages still to fill. as time has gone by,