lars nyberg : prices and costs in the swedish payment market speech by mr lars nyberg, deputy governor of the sveriges riksbank, to scandinavian card markets, stockholm, 25 january 2005. * * * to begin with, i would like to thank you for the invitation to participate in this conference. in my previous speech at this forum in 2003, i mentioned the pricing of card products and of other payment instruments as an area of special interest for us. i announced then that the riksbank, in consultation with the banks, had launched a research project related to this issue. the aim was to examine how well the price structure for retail payments reflects the underlying production costs for these services. today, given the short time at my disposal, i will confine myself to discussing the results of this study. 1 the evolution of card payments in sweden and in the nordic countries in order to achieve a more efficient payment system the prices for payment services should be based on production costs, including not only costs in the producing unit but also the end users ’ and the intermediaries ’ costs. other things equal, transparent and cost - reflecting prices give users the information they need to choose the payment instruments that cost less to produce. it is usually assumed that society ’ s total payment - related costs are lower the larger the use of electronic payment instruments. if you plot the share of electronic payments for a number of countries against the share of cash to gdp you get a broad measure of the cost efficiency of the different payment systems. the further to the northwest corner of such a diagram, the more automated the payment system is. according to these measures, the swedish payment market seems to be performing very well, as are the payment markets in the other nordic countries. swedes, however, seem to be using more cash than other nordic countries. the swedish m0 / gdp ratio lies 1 - 2 per centage points higher than the other nordic countries. as cash and card payments are close substitutes - in fact the only alternatives available for transactions at the point of sale2 - we would expect that the more widespread use of cash in sweden would be reflected in a lower use of card payments. payments data support this. swedes use more cash and make fewer card payments per capita than other nordic citizens. why do we observe these differences in the use of cash and the use of card payments in countries that otherwise have very similar payment systems? what variables influence the users ’ choice of payment instruments? given that users

housing market : it is well documented by empirical studies that a rapid increase in debt increases the probability of financial crises and falling prices on the housing market. the economy can also become more sensitive to various shocks if households ( and companies ) are highly 4 see, for example, backman, c, c lutz ( 2018 ) and cunliffe, j ( 2019 ). 5 see finocchario et al. ( 2016 ). 2 indebted. the studies also show that, if the banking system has large exposures to the housing market, financial stability can be threatened. 6 in the riksbank ’ s task of promoting financial stability 7, it is therefore important to ensure that the banks and their borrowers have resilience to shocks that could threaten financial stability. in addition, if financial stability should start to falter, there exists a risk that it would become more difficult to conduct monetary policy. i am well aware that both functional authority and tools lie beyond the riksbank ’ s remit, but as household debt and problems on the housing market affect the way the economy works, this development is also a source of unease for the riksbank. housing prices have been rising for a long time to begin with, i would like to say a few words on how housing prices have developed in sweden. since 2005, they have more than doubled, but the price rise started before then. the fact that housing prices have risen so rapidly for such a long period of time and are now historically high can be explained by factors such as the imbalance between supply and demand for housing, rising real wages and lower taxes, which have increased households ’ disposable incomes. 8 housing prices fell in the autumn of 2017, but have since then recovered slightly. the fall in prices has also affected housing construction, which, after increasing strongly in recent years, slowed down again in 2018 and 2019. over time, the development of housing prices has contributed towards increasing household indebtedness, even if the slightly weaker development in recent years has contributed towards lending for household mortgages now increasing more slowly than previously. all in all, this has led to household debt as a proportion of disposable income ( the debt - to - income ratio ) staying relatively unchanged over the last year, but being expected to continue to increase over the coming years. 9 the debt - toincome ratio for the entire household sector is currently over 186 per cent. this is a high