A steadily increasing number of Norwegians are entering into Internet banking agreements with their banks, and the number of payment transactions completed over the Internet is rising sharply. Norwegians use payment cards frequently and these types of payments continue to grow in number. Paper-based transactions are clearly declining. Electronic payment instruments are more cost-effective than paper-based instruments. Increased use of such instruments therefore reduces the costs of the payment system to the overall economy.

Increased use of Internet banking and cards
At the end of 2003, the number of agreements on giro transactions over the Internet had exceeded 2.5 million, a 32 per cent increase compared with end-2002. The number of payment transactions over the Internet rose by 18 per cent in 2003, reaching 96 million.

Mail giros are still a popular service. The number of transactions fell by 16 per cent to 52 million, however, and use of this service has been halved in the last four years. A total of 38 million giros were paid at the counter at bank branches in 2003, 7 million less than in 2002.

Norwegians have many payment cards, and there is hardly any country in the world that can report more frequent use of these cards. 702 million card transactions in connection with goods purchases and cash withdrawals were registered in Norway in 2003, an increase of 12 per cent on the previous year. Payment cards were used in connection with 130 goods purchases per inhabitant in 2003 for a total value of NOK 270 billion. At the end of 2003, there were more than 90 000 payment terminals in Norway.

Prices for electronic services unchanged and prices for paper-based services higher
Banks' average prices for electronic payment services have generally remained unchanged from 2003 to 2004, while prices for paper-based payment services have increased. Prices largely reflect what it costs to produce these services, thus providing customers with an incentive to choose the most cost-effective services. This is important in order to achieve an efficient payment system.

International payment systems
Many challenges remain before cross-border payment transactions can be completed as quickly and cost-effectively as domestic transactions. Transfer time is long and costs are high. However, the European banking industry is working to develop better cross-border payment services. These efforts will also benefit Norwegian bank customers.

Diminished risk
The Norwegian payment system is generally characterised by a high degree of safety and a low degree of misuse and fraud. Banks are exposed to credit risk and liquidity risk in the payment system, and systematic efforts have been made for a number of years to reduce these types of risk. Developments continued to be positive in 2003. The inclusion of the Norwegian krone in the foreign exchange settlement system CLS has contributed to reducing banks' risk.

Charts

The Annual report on payment systems is an important part of Norges Bank's oversight of the payment system. The report provides an annual update of developments and prices in the payment system. The report for 2003 also provides an overview of important events in the area and a review of various issues related to international payment systems. The report is available in Norwegian on our website and will be available in English in June 2004. Statistics on prices are published in more detail on www.norges-bank.no.