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The Laws and Economics of Payment Systems

May 27, 2016
Hiromi Yamaoka, Akihiko Watanabe, Chiharu Takeuchi
Payment and Settlement Systems Department

In designing payment systems, it is necessary to address how legal and institutional frameworks incentivize economic entities, and how their payment activities influence the safety and efficiency of overall systems as well as financial stability and market developments. Such studies and analyses are becoming all the more important in line with progress in information technology and payment innovation. In particular, we need to design a framework that continuously moves payments forward without causing gridlock or unwinding, since smooth payment flows are critical especially when highly-frequent transactions are processed back-to-back. We should also pay careful attention to network externalities and systemic risks. Information security is also a key issue, regardless of whether payments are processed in a centralized or decentralized manner.


Bank of Japan Review is published by the Bank of Japan to explain recent economic and financial topics for a wide range of readers. This report, 2016-E-4, is a translation of the original Japanese version, 2016-J-3, published in March 2016. The views expressed in the Review are those of the authors and do not necessarily represent those of the Bank of Japan.

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