The Bank of England (the Bank) has released a Discussion Paper outlining its approach to innovation in money and payments. This paper invites stakeholders to contribute to an extensive dialogue on advancing the UK payments landscape, building on the Bank’s ongoing efforts.
The Discussion Paper examines how rapid innovations in payments can influence the Bank’s monetary and financial stability objectives, presenting both opportunities and risks. It reviews the Bank’s current responses, such as the renewal of the Real Time Gross Settlement (RTGS) service and outlines future strategies to ensure safe innovation.
Given the swift technological advancements in financial markets, this is a pivotal moment for the Bank to evaluate its approach. The paper highlights the Bank’s plans in several key areas:
- Financial Stability Risks: The Bank identifies the risks associated with financial markets shifting away from central bank money. Its strategy aims to maintain central bank money as a cornerstone for confidence in the financial system.
- Technological Innovations: To uphold the role of central bank money, the Bank will explore technological enhancements to its systems, including the RTGS system and experiments involving wholesale central bank digital currency (CBDC).
- Retail Payments Objectives: The Bank emphasizes the need for households and businesses to make payments with ease, speed, and confidence. Achieving these goals requires strong leadership from UK authorities, with the Bank collaborating closely with HM Treasury, the Financial Conduct Authority, and the Payment Systems Regulator.
Andrew Bailey, Governor of the Bank of England, stated, “Confidence in money and payments is fundamental to the Bank’s responsibility for monetary and financial stability. As innovation in this space continues, our role must also evolve to support a robust and dynamic UK economy. Building on our work in recent years on new forms of digital money and renewing the Bank’s own RTGS infrastructure, we can now do more to explore new technologies in wholesale payments and to encourage greater innovation in interbank retail payments. To do that will require input and close collaboration from the private sector and other authorities, and this Discussion Paper sets out our thinking in these areas.”
The Bank invites responses to this Discussion Paper by 31 October 2024, welcoming contributions from a wide range of stakeholders to shape the future of the UK payments system.
