new zealand ’ s changing payments landscape and potential responses to it – a regulator ’ s view a speech delivered to payments nz ’ s the point 2022 conference in auckland on 9 november 2022 by karen silk, assistant governor and general manager for economics, financial markets and banking ref # x909373 v3. 0 kia ora koutou katoa, greetings to you all, thank you for this opportunity to present a “ regulator ’ s view of the changing payments landscape in new zealand and potential responses to it ”. at six months in to my role this is possibly the last time i can claim to be a recent joiner at the reserve bank of new zealand - te putea matua where it ’ s my privilege to be an assistant governor and the general manager of economics, financial markets and banking. in my career to date i have spent significantly greater time being regulated than regulating, but i ’ m enjoying the opportunity to reassess many familiar issues from new perspectives and in particular giving thought to how these may impact the prosperity and wellbeing of all new zealanders. we are all working and living in a period of substantive change my focus today will be on some of the challenges we see impacting new zealanders ’ ability to benefit from reliable and efficient money and payment systems supporting innovation and inclusion, and on some of the work at the reserve bank to directly address and support others in overcoming these challenges. my overarching message is that we are all working and living in a period of substantive change one that offers enormous opportunity if embraced, and potentially greater risk if it is not. payments are the ebb and flow of money. increasing attention is being given to both the global evolution in payment and money forms, to which new zealand is not immune, and to our increasing demand for better, smarter and faster forms of payments. this is not only the realm of advanced economies. emerging economies are embracing new technologies supporting greater financial accessibility and inclusion - in some cases leapfrogging those more advanced still clinging to aged infrastructure and payment practices. without greater ambition and innovation new zealand will not avail itself of the opportunity that technological change is creating. we oversee, operate, regulate, and supervise core payment systems – and steward money and cash the reserve bank ’ s role in money and payments is a multi - faceted one. first, we oversee, operate, regulate, and supervise core payment systems1. secondly, as a steward of money and cash our responsibilities lie not

sharia - compliant institutions to have a real asset to back their financial assets. nonetheless, these exposures also have a downside, as the experience of the past few years has reminded us. like conventional financial institutions, some islamic financial institutions have suffered losses resulting from their exposure to real estate markets around the world. moreover, because they are frequently the direct owners and developers of real estate projects, islamic financial institutions have been exposed to wider range of risks than conventional ones. as the ifsb argued in a recent paper, the events of the past few years should have given the industry a clear signal that it must reduce its reliance on real estate as an asset class. the requirement for a real asset to back financial assets can be met in many other ways than by financing the construction of office buildings, shopping malls or luxury apartments. the industry should look instead at the scope for increasing the finance it provides for productive assets such as factories, ports, mines, and oil processing facilities. financing these activities may appear less profitable in the short - term, but may be a better proposition on a riskadjusted basis. diversification is also needed of product offerings that will allow islamic financial institutions to serve their customers better and to generate more stable revenues. surveys of the islamic financial industry tend to show that firms have a comparatively narrow range of financial products to offer their clients. developing a greater product range will not only benefit consumers. it will also create new sources of revenue that tend to be more stable than those generated by cyclical industries such as real estate. as i said at the beginning of my remarks, it is in the interests of all involved in the industry – regulators, standard setters and above all practitioners – to ensure that it rests on secure foundations. in other words, the industry must be prepared constantly to subject itself to the sort of intellectually rigorous analysis that has been the hallmark of the work of professor simon archer whose contribution to the industry we celebrate this evening. throughout his long and distinguished involvement with the islamic financial industry professor archer has assessed its prospects both sympathetically and honestly. while aiming to encourage the growth and development of the industry, he has also recognised that its long - term potential can only be realized if it rests on strong foundations. the long - run objective of a sound and stable industry should not be sacrificed to short - term gain. these sound principles are exemplified by the work that professor archer has done over the years, both with aaoifi and with the ifsb. he has