Today most individuals, firms, authorities and other organisations take it for granted that they can make rapid, simple and efficient payments without any unnecessary risks. When we pay by card, for instance, we do not need to think about which bank the recipient uses. We can assume that the payment will reach the correct recipient anyway.
Payments can be made either using cash or by means of credit transfers between different accounts. Today the value of cash transactions made in Sweden is negligible in relation to the value of the account-based transfers.
Payment intermediaries are needed to manage account-based payments; these are usually banks and clearing organisations. If a credit transfer takes place between customers of the same bank, it is possible to use the bank’s internal systems. Some payments are made in this way. However, in most cases the senders and recipients of payments have different banks. This is when a payment system is required, an infrastructure between the banks to enable the execution of the transactions and ensure that payments reach the correct recipient relatively quickly.
It is usually only certain financial companies that have access to the payment system infrastructure. This means that individuals and firms must turn to these in order to use the system. It is extremely important that this infrastructure functions efficiently, in order to achieve low costs for making payments. This is important to households and firms, as well as to the financial markets. If everyone can assume that the infrastructure is functioning efficiently, transaction costs will fall. This is important since even low transaction costs can lead to significant costs to society in that each economic transaction entails a payment.
The banks' bank
A payment system usually consists of a set of accounts, a regulatory framework for coding and various EDP systems for communicating and implementing the payments. The central point of the Swedish payment system is the Riksbank's RIX system. All of the banks have accounts in RIX (either directly or via an intermediary, that is to say, a clearing bank). When the banks make payments to one another they transfer funds via accounts in RIX. The Riksbank can therefore be said to be the banks’ bank. The RIX system has a weekly turnover that corresponds to the entire Swedish annual gross domestic product, GDP.
The main participants in RIX are the major banks and a number of clearing organisations. These organisations clear a large number of payments, such as those from securities markets. Clearing consists of a number of checks, including whether the transaction is correct and whether there are sufficient funds to cover the payments, as well as compiling instructions as to how the transfer should be implemented. It is only when the checks are complete that the actual transfer is made to the recipient's account, that is to say, the payment is settled. Only the settlement occurs in RIX.
In some cases a process called "netting" is used, which entails setting off a number of claims and counterclaims between two or more parties against one another and calculating a net figure. It is then only this net figure that is settled in the RIX system. The clearing organisations constitute an important part of the payment system.
- The Swedish central securities depository, VPC, is the organisation where the exchange of money for securities takes place, both with regard to transactions in the stock market and transactions in the fixed income market.
- With regard to shares and derivatives in Sweden, Stockholmsbörsen (the Stockholm stock exchange) plays an important role in the financial infrastructure. However, it is primarily in its function as central counterparty and clearing organisation for derivatives that Stockholmsbörsen has significance for the stability of the financial system.
- Bankgirocentralen, BGC, is the clearing organisation for a large number of retail payments.
In addition, there are two international systems of significance to Sweden.
- Continuous Linked Settlement, CLS, is a system for clearing and settlement of foreign exchange transactions. The Swedish krona is one of the currencies included in CLS.
- In addition to the RIX system for Swedish kronor, there is a corresponding system for making payments in euro, E-RIX. This system is part of the network of payment systems within the EU, known as TARGET (Trans-European Automated Real-time Gross settlement Express Transfer system).
A more detailed description of the Swedish financial infrastructure can be found in the publication "The Swedish Financial Market
", see link below.
One of the Riksbank's tasks is to oversee the financial infrastructure. Security and efficiency are key words as an efficiently functioning payment system oils the wheels of the economy. However, a major disruption could entail serious consequences for the economy as a whole.
The Riksbank's oversight of the financial infrastructure involves assessing the various payment systems according to common international standards. The Riksbank also carries out studies of risks and efficiency regarding the payment system and the use of various payment instruments; cash, card payments and credit transfers. One example is the article “Prices and costs in the Swedish payment system” in Financial Stability Report 2004:2, see the link below. By influencing various participants in the system, the Riksbank also attempts to reduce risks and increase efficiency. In addition, the Riksbank operates the central RIX payment system.