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Introducing a new five-year roadmap to improve the security, efficiency, and accessibility of retail payments, the Riksbank has made it clear that payments infrastructure in the Nordic country must be enhanced.
In a new study, the bank argues that rapid change in the financial landscape and evolving technological standards mean there is an urgent need to modernise the nation’s retail payment infrastructure.
Retail payments, which are everyday transactions between individuals, businesses and government entities, are pivotal to Sweden’s economy, and instant payments, already prominent in the country through platforms such as Swish, are projected to play an even greater role in the future.
To accommodate these changes, the Riksbank recommends a wholesale upgrade to the systems responsible for clearing (processing payment orders) and settlement (finalising transactions).
In the study, it outlines a variety of recommendations for the government to consider, including the adoption of international standards such as the ISO 20022 global messaging standard and the Nordic Payments Council’s (NPC) schemes to enable seamless cross-border transactions.
“The use of NPC schemes and ISO 20022 is important to make Swedish retail payments look and function like European payments,” the Riksbank says. “Standardisation leads to better conditions for innovation, competition and efficiency while executing retail payments.”
The central bank has also thrown its support behind instant payments, stating that systems need to be able to process payments instantly and at scheduled intervals, ensuring 24/7 availability.
In addition, it says that under new EU regulations, payments and e-money institutions should gain access to clearing and settlement systems, which will foster competition and innovation.
It goes on to say that “one positive effect of the arrival of new participants is that it promotes innovation in the Swedish payment market”.
At the same time, it warns that the “new participants need to fulfil the requirements set to maintain financial stability, such as resilience in the face of cyberattacks”.
Boosting operational resilience
The Riksbank’s study also raises the issue of enhanced resilience, noting the importance of strengthening defences against cyberattacks, fraud and money laundering.
“Given the current geopolitical situation, there is good reason to increase emphasis on the resilience of payment infrastructures,” it says. “They need to function both during peacetime crises and in states of heightened alert.”
It also suggests that transitioning card payment settlements from commercial to central bank money is a way of reducing systemic risk, stating that “settlement in commercial bank money is more risky”, as a default by one party can affect multiple participants and lead to multiple defaults.
“This can be avoided if card payments revert to being settled in central bank money, like most other retail payments.”
The Riksbank emphasises that state and private sectors share responsibility for implementing these changes, and that although the private sector is expected to drive innovation, the government may intervene if progress lags.
