"In Norway, the payment system supports the economy. Payment transactions are conducted cost-efficiently, quickly and reliably. The payment system performed very well during the crisis and banks’ awareness of costs has probably increased even further. As a result, I think that the will to continue developing an already well functioning payment system will be strong ahead", says Deputy Governor Jan F. Qvigstad.

If the payment system does not function, the economy will rapidly come to a halt. Trades will not be settled and consumers and firms will not have access to their funds. During the financial turbulence, the systems have proved to be robust, contributing to maintaining economic activity in a period when confidence in counterparties was low.

The past decades have seen strong productivity growth in payment services. Paper-based services such as cheques and postal giros have been replaced by payment cards and online banking. Electronic services now account for 97 per cent of all non-cash payments. This has reduced the number of manual operations and has made an important contribution to the increase in productivity.

Cash is still used for a high percentage of payments, but its importance as a means of payment has declined over time. The share of cash holdings has been halved over the past ten years and is now 7 per cent, compared with 14 per cent ten years ago.  The share of cash holdings is lower in Norway than in most other countries.

The cost of payment services in Norway is estimated at about NOK 11 billion, or 0.5 per cent of GDP. Banks have increased their cost recovery in relation to payment services, but costs are still higher than revenues, particularly for services that involve cash handling. Banks face the challenge of reducing costs and increasing revenues from these services. If banks do not cover their costs, the loss will have to be made up through other activities.

The report is available in Norwegian and print copy can be ordered from Norges Bank. The English version will be available on our website at a later date.