Financial Infrastructure Report 2022
With its annual Payment Systems Report, Banco de la República offers a complete overview of the infrastructure of Colombia’s financial market. Each edition of the report has four objectives: 1) to publicize a consolidated account of how the figures for payment infrastructures have evolved with respect to both financial assets and goods and services; 2) to summarize the issues that are being debated internationally and are of interest to the industry that provides payment clearing and settlement services; 3) to offer the public an explanation of the ideas and concepts behind retail-value payment processes and the trends in retail payments within the circuit of individuals and companies; and 4) to familiarize the public, the industry, and all other financial authorities with the methodological progress that has been achieved through applied research to analyze the stability of payment systems.
Banco de la República's monitoring of the local financial market infrastructure is an additional contribution to the country's financial stability. One of the products of that monitoring has been the Payment Systems Report, which is now known as the Financial Infrastructure Report. The change in name, as of this edition, is intended to reflect in a broader way the issues that are addressed in the report.
The 2022 edition includes several changes that are the result of a comparative study of financial infrastructure reports prepared by other central banks. These changes seek to make the report more fluid and easier to read, including main points and selected key figures for the different interest groups to which it is addressed.
The report shows the financial infrastructure continued to render its services without interruption, with general evidence of good performance in 2021. Additionally, the resilience of the Central Counterparty Risk of Colombia (CRCC) and the Large-value Payments System (CUD) to extreme events was validated, based on stress tests conducted according to international standards (focused on liquidity and credit risk).
As for retail payments, transactional information indicates the use of electronic instruments increased in terms of value during 2021 compared to 2020 (credit and debit cards, checks and electronic funds transfers). The use of debit and credit cards in payments rose to levels similar to those reached in the pre-pandemic year. Meanwhile, electronic funds transfers continued to grow.
Although the results of the BR 2022 survey show cash continues to be the instrument most used by the public for regular payments (like the situation in other countries), the perception of its use decreased significantly to 75 % (87 % in 2019). Also, in commerce, cash was the preferred instrument for customers. However, in this measurement, several retail channels such as hairdressers, drugstores and restaurants joined the group that has traditionally received electronic payments for a value greater than 10% of their sales (hypermarkets and gas stations). Likewise, for nearly 50% of the population, cash payments are lower than before the pandemic. This is consistent with the transactional increase in electronic payment instruments that was
observed in 2021.
Banco de la República continues to monitor the technological developments that have expanded and modernized the supply in the international and local payments market, as these are issues of interest to the industry that provides clearing and settlement services. This report outlines the Pix case for instant payments in Brazil, the projects that are underway regarding the possible issue of digital currency by central banks (CBDC) for cross-border payments, as well as an approach to the Fintech ecosystem in Colombia, with an emphasis on companies that provide payment services.
Leonardo Villar
Governor
Main points: 2022
The local financial infrastructure was safe and efficient throughout the year.
The services of the financial infrastructure were proved on a continuous basis, showing good performance overall.
Less momentum in the large-value payment system
CUD activity declined versus the previous year because of fewer government deposits with BanRep. This was offset partially by growth in repos to increase money supply and in retail-value payments (electronic funds transfers, checks and cards).
Increased momentum in financial market infrastructures.
Larger amounts were cleared and settled through the Central Securities Depository (DCV) due to an increase in the market for sovereign debt. Operations managed by the Central Counterparty Risk of Colombia (CRCC) increased due to inclusion of the foreign exchange segment and the positive evolution in non-delivery forward peso/dollar contracts.
Added confidence in the peso/dollar spot foreign exchange market due to CRCC interposition.
Number and value of trades grew, mainly due to the adjustment of therisk management model for the FX segment and the increase in the limiton net selling positions in dollars.
Stress testing with international standards to validate CRCC and CUD resilience
Stress tests conducted independently by the SFC, BanRep and the CRCC, like those done in England and the United States, concluded that the CRCC's risk management model allows it to withstand extreme market events and simultaneous defaults by its main members.
Based on the experience of other central banks, BanRep strengthened its intraday liquidity risk stress exercises in the CUD by incorporating temporary payment delays. It calculated that a two-hour delay by a key participant increases the system's liquidity needs by 0.5%.
Electronic payments increased during 2021
According to transactional information, all electronic payment instruments increased in value versus 2020 (electronic funds transfers, checks and debit and credit cards). Electronic funds transfers continued to grow (80% from legal entities), with the participation of closed schemes driven particularly by the use of mobile wallets (35% of the number of intra-transfer transactions). The use of debit and credit cards for payments climbed to levels
similar to those witnessed in the pre-pandemic year.
Cash continues to be the instrument most used by the public for regular payments.
The results of the BanRep survey in 2022 show that the perception of the use of cash declined significantly to 75% (87% in 2019), and about 50% of the population perceive their cash payments as being lower than those they made before the pandemic. Electronic funds transfers were second most used instrument, having increased to 15% (3% in 2019). Also, in commerce, cash was the preferred instrument of payment for its customers; however, several commerce channels received more than 10% of the value of their sales in electronic payments (hypermarkets 35%, gas stations 25%, hairdressers 15%, drugstores 14% and restaurants 12%).
Continuous technological developments have broadened, and modernized services offered in the payments market.
- Pix (instant payments in Brazil). The high level of adoption of instant transfers in Brazil motivated a review of its strengths; namely, the possibility of different use cases between individuals, businesses, and government; high participation by financial and payment institutions; free of charge for individuals and the possibility of charging legal entities, and simple user experience.
- Digital currencies in central banking. Several groups of countries have joined forces to conduct pilot projects with wholesale CBDCs for cross-border payments. Flows generated by international trade, foreign investment and remittances between individuals can be processed more efficiently, transparently, and securely by reducing their cost and increasing their speed. Due to the constant progress being made on this issue, BanRep will continue to monitor all CBDC-related matters.
- The fintech ecosystem for payments in Colombia. A high percentage of existing FinTech companies in the country are dedicated to offering digital payment services: wallets, payment gateways, mobile devices (point-of-sale terminals) and acquisition. These have driven innovation in payment services.
Selected key figures, 2022
(In terms of daily average for 2021 and annual change, percentage)
By infrastructure
Transactions settled in the CUD
| Value | Number |
|---|---|
| COP 53.3 b (-4%) | 6,188 (-5%) |
Payments in financial markets
| Value | Number |
|---|---|
| DCV COP 34.4 b (28%) | 2,150 (3%) |
| CRCC COP 15.7 b (264%) | 5,814 (186%) |
| Deceval COP 2.6 b (-20%) | 6,853 (-1%) |
| COP 52.7 b (45%) | 14,817 (34%) |
Retail payments
| Value | Number |
|---|---|
| ACH Colombia COP 5.6 b (23%) | 1.2 m (15%) |
| ACH Cenit COP 1.1 b (14%) | 66,225 (186%) |
| Cedec COP 0.6 b (27%) | 22,819 (-1%) |
| Redes TyC COP 0.6 (20%) | 5.5 m (36%) |
| COP 8 b (22%) | 6.8 m (31%) |
By instrument
Electronic funds transfers
| Value | Number |
|---|---|
| Intra COP 13.5 b (2%) | 3.3 m (62%) |
| Inter COP 6.7 b (21%) | 1.3 m(16%) |
| COP 20.3 b(7%) | 4.6 m (46%) |
Card transactions
| Value | Number |
|---|---|
| Débito COP 845 mm (18%) | 3.2 m (19%) |
| Crédito COP 198 mm (26%) | 0.8 m (21%) |
| COP 1 b (19%) | 4 m (20%) |
Check transactions
| Value | Number |
|---|---|
| Intra COP 230 mm (18%) | 13,070 (-21%) |
| Inter COP 621 mm (27%) | 22,819 (3%) |
| COP 851 mm (25%) | 35,888 (-7%) |
