In a press release on June 5th, the Netherlands’ Central Bank, De Nederlandsche Bank (DNB), explained its payments strategy for 2018-2021. It focuses on three pillars: stimulating innovation; maintaining a robust payments system in a changing world; and creating an efficient cash payment chain.
The central bank opens the release by stating that the payments and securities system in the Netherlands is “generally secure, reliable and efficient.” The rapidly-evolving nature of the payments industry formed the motivation for the DNB to set its priorities in this area between 2018-2021.
Regarding the first pillar of the strategy on stimulating innovation, the bank notes the increasing demand for fast and simple payments from both individuals and businesses, with this demand creating opportunities for both businesses and banks. The DNB will nurture innovation through increasing its knowledge on new technologies and supporting market initiatives while keeping a close watch over the risks that come with these technologies — privacy violations, operational disruptions.
As for promoting a robust payments system, the bank situates its efforts in a quickly changing and complex payments landscape and the Netherlands commanding a reliable payments infrastructure. To ensure that the Netherlands’ payments system remains robust, the bank will focus its efforts on bolstering the resilience of individual institutions and the payments sector against cyberthreats.
The third pillar centres around declining cash payments, with the bank envisioning a society using less cash that will not become cashless. The DNB throws its weight behind less cash instead of a completely cash less society because “ready money still plays a role in society.” A reduced number of cash transactions means ensuring cash is accepted everywhere, reducing cash-associated costs, and making sure cash is reliable and safe.
At the end of the release, the bank mentions that instant payments are the future, and the infrastructure to process these payments is currently being developed. It also notes that distributed ledged technology (DLT) could make reduce costs and make payments more efficient.
Regarding DLT, the DNB mentioned in a blog on June 7th that although it can increase the current financial infrastructure’s resilience against cyber attacks, this resilience comes at the expense of efficiency, capacity, and scalability. This conclusion was based on a project called Dukaton. The project tested four DLT prototypes over a time period of three years. Given the above, the bank will still continue to invest in the development of blockchain and does not completely shut out the idea of a blockchain arrangement that could meet the needs of the Netherlands’ financial system.
By Elliot Lyons, Research Analyst