Bunge: Public-private sector cooperation is key to a secure, accessible and innovative payments market

In her presentation on the state of the economy, she highlighted the fact that inflation has been close to 2 per cent and that indicators point to inflation remaining in line with the target going forward. "The inflation outcome for January was slightly higher than expected, but the reasons for this are not yet known and individual figures should be interpreted with caution."

The Riksbank has emphasised that a rebound in the Swedish economy is needed for inflation to stay close to the target in the period ahead. "There are early signs of a rebound, but it is important that we receive further information that confirms our forecast."

Much of the uncertainty surrounding the outlook for inflation and economic activity going forward comes from abroad. A weaker krona, supply shocks, increased producer prices and a return to more ‘volatile’ pricing behaviour when demand rises are upside risks for inflation. But tensions in the world around us are also a downside risk for the rebound in the Swedish economy and thus for inflation in the slightly longer term. "Uncertainty regarding demand for Swedish exports and the imposition of tariffs could delay investment and increase precautionary saving."

It is also important to remember that monetary policy works with a time lag. Ms Bunge emphasised that in the past three months alone, the Riksbank has cut the policy rate by a full percentage point. "It takes time for the cuts to have an effect, and this favours a tentative approach in our monetary policy going forward." 

During the SEB Northern Thoughts Day, Ms Bunge shifted focus and talked about the Swedish payments market. The Riksbank shall, pursuant to the Sveriges Riksbank Act, contribute to the stability and efficiency of the financial system, which also includes the ability of the public to make payments.

"We fulfil this by monitoring and contributing to developments in the payments market. We provide the RIX payment system through which all large-value payments between banks are processed. In addition, we also issue banknotes and coins," said Ms Bunge.

She also highlighted the rapid pace of change. Cash usage is low and most people prefer digital payment methods. Sweden has a strong and innovative financial sector that has contributed positively to development. The Riksbank has also made major changes to the RIX payment system to enable banks and companies to create new services for instant payments via RIX INST. The Riksbank has also decided that its future direction will be to cooperate with other European central banks and the TARGET system with regard to payment infrastructure and securities settlement. More types of financial companies than today will also be able to connect to RIX, with effect from April. But at the same time, she emphasised that there are a number of issues that need to be addressed in the payments market.

"The payments market has developed rapidly and it has become easier to pay for most people in Sweden. However, there are some groups that find it difficult to make their payments when cash has been marginalised. We have to deal with that and it is good that the government recently looked into the question of how to secure cash, both for reasons of inclusion and for emergency preparedness. We also see an increase in fraud, especially against the elderly. In addition, we are relatively dependent on electricity and data communications to make payments".

To ensure that payments can be made even in times of crisis, the Riksbank has been given an extended mandate whereby it may impose requirements on companies that are of particular importance for the implementation of payments. It is also working on initiatives to improve the availability of offline payments.

Furthermore, Aino Bunge emphasised that the possibility of making payments between different currencies is not satisfactory at present. This is something that the Riksbank, together with other central banks, is trying to change through an initiative to improve cross-currency payments. They expect the private sector to be involved in this work. Ms Bunge says that this type of cooperation is key to the healthy development of the entire payments market.

"The Riksbank has done and can do a lot. The government has an important role to play in ensuring that the payment system fulfils society's objectives and is accessible to all. This is important not least in times of uncertainty. But the private sector is a force for innovation, developing new services based on customer needs. Cooperation between the private and public sectors is essential to ensure that payments in Sweden are safe and efficient in all situations," concluded Ms Bunge.