Payments on Digital Platforms: Resiliency, Interoperability and Welfare
This paper studies the business model choice between running a cash platform and a token platform, as well as its welfare and policy implications.
Money and payments
The digital age is reshaping the very nature of money and payments. Our research aims to ensure Canadians have access to safe, reliable and convenient forms of payment—including cash—now and into the future.
Recent technological advancements have paved the way for new payment options and new participants in the payments ecosystem, a trend that will certainly continue to shape how people buy things and transfer funds in the coming years. These innovations can make financial services more efficient and cheaper to deliver to Canadians. But they also increase risks, such as fraud and data breaches.
This is why our research is so critical. We study how the rise of digital currencies and electronic payments affects our ability to fulfill our core functions, including keeping inflation on target, promoting financial stability and issuing bank notes that Canadians can trust.
Examples of areas we are researching:
- the payment innovations that could have the biggest impact on demand for cash in the future
- ways to ensure Canadians can continue to access and pay with cash as patterns of cash use shift
- the reasons why cross-border payments are expensive and slow
- how to balance the speed and convenience of the retail payment system with risks like fraud and data breaches
- the benefits and pitfalls of integrating tokenized assets into payment systems
Cash and bank notes
The Bank is the sole issuer of bank notes in Canada, and we want Canadians to use these notes with confidence and pride. And, in fact, they do: even with new and innovative payment methods available, cash still accounts for one out of every five transactions at the point of sale. We consistently examine the demand for and use of cash, as well as its accessibility and acceptance within the economy. This requires an understanding of current trends and emerging challenges, including developments in cryptoassets and financial technology (fintech).
Payments
The Bank is committed to understanding and shaping the evolving landscape of payment options to ensure Canadians benefit from any changes. As new technologies and payment service providers emerge, we conduct research to address challenges such those related to cross-border transactions, access to central bank payment systems and the prospective design and structure of the payments ecosystem. Additionally, we are assessing how the Bank’s new role supervising retail payments service providers fits within this broader context. Our research informs policy development and regulatory oversight with the end goal of delivering better outcomes for Canadians.
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JEL Code(s):
E,
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JEL Code(s):
C,
C1,
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Content Type(s):
Staff research,
Staff working papers
JEL Code(s):
D,
D1,
D12,
D2,
D23,
D3,
D31,
E,
E4,
E42,
G,
G2,
G21,
L,
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L81
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Disclaimer
Bank of Canada staff produce research and analysis to support the work of the Bank and to advance knowledge in the fields of economics and finance. The research is non-partisan and evidence based. All research is produced independently from the Bank’s Governing Council. The views expressed in each paper or article are solely those of the authors and may differ from official Bank of Canada views.