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Technology Innovation in Financial Markets: Implications for Money, Payments and Settlement Finality

Wandhofer, Ruth (2019). Technology Innovation in Financial Markets: Implications for Money, Payments and Settlement Finality. (Unpublished Doctoral thesis, City, University of London)


In this thesis we explore the implications of technology innovation across the areas of settlement finality, cross border payments and money.

As a first step, we investigate the topic of settlement finality in the context of Proof-of-Work (PoW) blockchains, exemplified by Bitcoin. This is of particular importance as final settlement plays a crucial role in removing settlement risk between counterparties in support of financial stability. We extend earlier work in Berndsen (2013) on functional modelling of the theoretical settlement problem. By applying his model we provide a functional interpretation of settlement finality and propose a new encompassing definition of settlement finality, which expands the academic field of payment economics. We also assess whether PoW is functionally superior to the backward looking legal framework for settlement finality.

In a second step we explore whether and how technological innovation, in conjunction with policy measures, can improve the process of correspondent banking cross-border payments. Following the empirical validation of existing shortcomings by using a questionnaire and industry expert focus group sessions, we identify key requirements based on which we develop several design scenarios for the future of cross-border payments. We then evaluate the different models and complement our findings with policy and standards recommendations, outlining a practical way forward for the industry.

Finally we explore an alternative perspective on the future role of central bank money as a retail use digital complement to physical cash. Against a set of future scenarios we develop the rationale for a Eurosystem issued ‘Digital Euro’ and proceed by delivering a high level blueprint for the design of such a solution. As retail cash payments move into the digital age with the associated challenges for citizens’ data, identity as well as financial stability and system security, such a step will become an increasingly relevant consideration for the Eurosystem.

Publication Type: Thesis (Doctoral)
Subjects: T Technology > T Technology (General)
Departments: Bayes Business School
Bayes Business School > Finance
Bayes Business School > Bayes Business School Doctoral Theses
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