Payment services free of charge are not in bank customers’ best interests
There are now signs that banks are reducing prices for many payment services or offering them free of charge. “This is not in bank customers’ best interests”, says Governor Svein Gjedrem in connection with the presentation of Norges Bank’s Annual Report on Payment Systems for 2007. “Ensuring safe and efficient payment transactions requires considerable investment. A reduction in earnings may reduce banks’ capacity and willingness to invest in improved infrastructure. Furthermore, without cost coverage, payment services will have to be financed by earnings from other services. This sends the wrong signal to customers and may result in the inefficient use of resources”, says Gjedrem.
Norges Bank’s Report shows that Norway has an efficient payment system. Almost all payment transactions using deposit money are conducted electronically. An increasing share of household consumption is paid by card. Norwegians made an average 207 payments each using payment cards in 2007. The use of Internet banking is still increasing, and Norwegians made 68 payments each via online banking last year. Norway is an international leader in the use of electronic payment services. Cash in circulation as a share of household consumption has decreased in recent years. Cash as a share of the total means of payment available is also diminishing, and this share is low in Norway compared with other countries.
As deposit money is so extensively used, systems handling these transactions must maintain a high standard. Turbulence has characterised international financial markets since summer 2007. In this kind of situation, financial institutions can be vulnerable to shocks, and it is particularly important that the financial infrastructure is robust. The systems for clearing and settlement of payment transactions (interbank systems) are a part of this infrastructure. The systems deal with both large interbank transfers and small payment transactions between bank customers. Norges Bank oversees the Norwegian interbank systems.
“In our opinion, the systems maintain a high standard. They are generally designed in such a way that they do not increase the risk of a problem spreading from one bank to others”, says Governor Svein Gjedrem.
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