Excerpts from speech at the 2018 Autumn Annual Meeting of the Japan Society of Monetary Economics, Bank of Japan deputy governor, Masayoshi Amamiya
Digital payment instruments, unlike cash, can carry much more detailed data such as who buys what, when and where. Now many giant IT firms, known as bigtechs, have embarked on providing cashless payment services at low cost or sometimes for free.
These firms tend to use payment services as a platform to collect big data, and utilize these data for a variety of businesses. In such businesses, users provide their own data, instead of paying monetary fees, in exchange for the use of these services.
As the development of cashless payments accelerates the accumulation and utilization of customer data, money and data will be more and more interlinked and become closer to each other.
As such, various companies will continue making efforts to collect customer information through providing economic incentives when payments or settlements are being made. On the other hand, customers will require digital payment
instruments to protect their rights and privacy by separating sensitive data or limiting the use of it.
Also, stronger links between money and data are expected to influence the economy and financial structures in various ways. For example, global IT innovation and data revolution have enabled firms to have the opportunity to purchase customer data through offering discounts and rewards. Since these discounts and rewards are usually subtracted from the sales prices of goods and services, IT innovation and data revolution might work as downward forces to general prices measured by traditional statistics in many countries.
Also, commercial banks have so far been providing both payment services and credit intermediation services by making use of deposits as a core. On the other hand, IT firm and e-commerce firms, which have newly entered financial services, provide a variety of services including financial ones, by making use of big data and platforms for collecting data as a core. As such, stronger links between money and data are expected to alter the structure for providing financial services.
Firms and individuals, which are users of financial services, can be regarded as bundles of information and data. Firms provide their own information and data, regarding their strength and the risks and returns of their businesses, to financial institutions, and then receive financial services such as loans.
Moreover, recently more and more non-bank entities have entered financial services. They often provide their own liabilities as payment instruments. Financial authorities are now asked to consider how they should monitor and deal with these non-bank entrants, and what kind of frameworks should be prepared for them. This issue is ultimately linked to the issue of how to define banks.
Although it is very unlikely that crypto-assets are widely used for payments and settlements, digitized cashless payment instruments will continue to grow and be more widely used. In accordance with such a trend of digitizing payments, money will also play a greater role as a medium of information and data. The link between money and data will be strengthened further, and the closer link between them will influence the structure of financial services and the economy.