25. 09. 2020 how central banks can use digitalisation to better serve the public : the case of payments navigating the digitalisation transformation - virtual omfif - banque de france seminar pablo hernandez de cos governor good morning, i would like to start off by expressing my gratitude to both the omfif and the banque de france for organising this very interesting and, certainly, timely event. like many of my esteemed colleagues, i have been vocal about the growing relevance of emerging technologies for the financial system before. in fact, at the banco de espana we are closely monitoring trends in order to fully understand their potential implications and be ready to act quickly, where necessary. yet despite all its recent history and significance, it is now - in the light of the pandemic - that digitalisation has become even more critical and, possibly, also a catalyst for a tectonic shift across multiple dimensions. products, services, business models, distribution channels and touch points all over the industry may, indeed, be closer today to an accelerated reshaping than was the case only a few months ago. if anything, these difficult times have, in my view, proven what a valuable ally digitalisation can be to strengthen banks ’ resilience and secure the necessary flow of funds to society at large. this has been instrumental to mitigate some of the damage caused by the outbreak. more broadly, the virtualisation of our economic activity during the pandemic has further provided a necessary backstop for many businesses that used to rely solely on their physical presence. as such, digitalisation has once again proved to be not a goal in itself but rather a means to serve a much broader purpose, as it offers a novel toolkit to push out the boundaries of what has been possible in the past, allowing us to address well - known and often challenging problems in a convenient and much more effective manner. exploring the pros and cons of issuing a central bank digital currency ( cbdc ) since the previous panel has already covered these covid - related themes quite extensively, i would rather use my time to draw your attention to something different and yet equally important as a reflection of the impact of digitalisation. hence, in the next few minutes i will comment on the way in which this transformational process echoes in a specific context, namely that of a central bank in its role as service provider, and the crosscutting impact this may have on the broader ecosystem. as in other

demographics, not the product of the crisis. the more important question is whether any of the problems we see today will become permanent. this question is relevant at the global level, but let me illustrate it with direct reference to our own situation here in canada. historically, a typical recession / recovery cycle has taken a couple of years to complete. during the recession – let ’ s say it originates with a drop in export demand – companies cut back production, lay off workers, and investment and consumption spending fall. monetary and fiscal policies respond, exports recover, companies rehire their workers and move production back to normal. but this cycle has not been a typical one. the downturn was deep and has proved to be long lasting. canada ’ s export sector not only cut back on production and laid off workers, many companies restructured, many simply disappeared. recent bank of canada research on exporters sifted through more than 2, 000 categories of underperforming, non - energy exports. we found that the value of exports from about a quarter of them has fallen by more than 75 per cent since the year 2000. had the exports of these products instead risen in line with foreign demand, they would have contributed about $ 30 billion in additional exports last year. by correlating these findings with media reports, we found that many were affected by factory closures or other restructurings. obviously, not all of this can be blamed on the financial crisis and the ensuing downturn, but for companies that were already struggling with competitiveness, the crisis surely accelerated things. the point is, when companies downsize, relocate or close their doors, the effects on the economy are permanent. those specific lost exports will not recover – something else is more likely to take their place, but that requires that surviving companies expand, or new exporting companies be created. and both such processes are bound to be much slower than in the typical recession / recovery scenario. a destructive downturn also creates long - lasting effects in our labour market, since the associated jobs are lost permanently. we have recovered well from the employment losses during the downturn, but our labour market has not yet returned fully to normal. indeed, labour conditions in canada point to material slack in the economy. we have been creating jobs at a trend rate of less than 1 per cent, well below what one would expect from an economy that is recovering. furthermore, much of the recent employment growth has been part time. there are over 900, 000 people