Member of the Board Tuomas Välimäki
19th Simulator Seminar
Second Payment and Settlement System Simulator Webinar
Online, 1 September 2021
opening remarks at the SECOND PAYMENT AND SETTLEMENT SYSTEM SIMULATOR WEBINAR
Good morning, good afternoon or good evening, depending on your location,
I am Tuomas Välimäki, a member of the Board here at Suomen Pankki. I am responsible for markets, payment systems and data management. Research also reports to me, and I also cover issues related to digitalization.
Today, it’s my pleasure to open the 2021 Bank of Finland Simulator Seminar. This is the 19th consecutive year we bring the community working on payment simulations and analysis together. So, since 2003, our Simulator Seminars have provided a meeting place where the participants have been able to present their ongoing research and get fresh ideas for their work.
Now, during the pandemic, we have observed several rapid changes in payment habits. Whereas the volume of banknotes in circulation has still increased, the trend decline in the use of cash as a mean of payment has been further accelerated. Currently, only 6% of Finns report cash as their main payment method for their daily transactions.
The fear of corona-virus has promoted the use of contactless payments at the point of sale both by card and via mobile devices. Yet, card payments are likely to have peeked in popularity, as mobile and instant payments are gaining more and more market shares.
To put it short, based on the data we collected earlier this year from banks, consumers and non-bank payment service providers, it seems obvious that paying in Finland is already now largely digital, and this is not likely to change when the pandemic phase is over. If you are interested in our analysis on these issues, my colleagues will make the reference to it available at the chat window.
The deployment of instant payments is also of particular interest for central banks. Going towards real time also in retail transactions seems to be the new normal, but the transition is still on its way. In the Bank of Finland, we have studied the liquidity implications that will result from the large-scale move from batch-based payments to real-time gross payments. The outcome of that work will be introduced in the Economics of Payments webinar in October.
The Payment and Settlement System Simulator is a tool that can be utilized in many types of quantitative analysis of the payment and settlement systems. Since our last seminar, the development work with the BoF-PSS2 simulator has been concentrated on the renewal of the user interface. Indeed, as the graphical user interface was redone completely, we thought it would be appropriate to label the latest version as a new generation; so, our simulator is now called BoF-PSS3. The new version is available for distribution, and already being applied by some central banks. If you want to know more about it, please contact our Simulator team, Tatu Laine or Kasperi Korpinen. Additionally, today you will hear about our latest simulation analysis done by using the new PSS3 version.
We at the Eurosystem are enhancing the European financial market infrastructure. TARGET2 payment system and T2S securities settlement system are going to be consolidated on a single platform. The project is ongoing, and the new platform is scheduled to go live in November 2022. Thanks to the consolidation, we also need to update the Eurosystem’s environment used for TARGET2 analysis and simulations.
The Bank of Finland will deliver the simulation tool also to the renewed analytical environment. Actually, the realization phase of the project started earlier today, and the analytical tools should be ready in November 2022 simultaneously with the launch of the new production platform.
Now, take your calendars out: the Bank of Finland will host the tenth Economics of Payments conference in October. The Economics of Payments is a regular academic seminar that was last time organized by the BIS in 2018. This year, the conference will be organized as a series of virtual events during three afternoons from Wednesday the 20th until Friday the 22nd of October. The topics will range from retail payments to implications of the pandemic to fintech, as well as from market infrastructure studies to the hot topic of CBDC. The two keynotes will be delivered by professor Christine Parlour on FinTech competition, and by Professor Dirk Niepelt on risks related to CBDCs.
Central Bank Digital Currency is indeed a topic that has gained a lot of attention in the last years. This July, the Eurosystem initiated an investigation phase on digital euro. If issued at some point in time, the digital Euro would be the third form of central bank money in addition to banknotes and banks’ RTGS balances. We have long experience in simulating CBDC, but a wholesale version of it, i.e. the RTGS balances. If retail CBDCs were to be issued in the future, it would call for a new type of quantitative analysis and it is likely to bring a growing number of use cases for simulation tools.
Finally, today’s agenda is compact, yet extremely interesting. There will be five presentations in this webinar including a keynote by Professor J. Doyne Farmer. We hope that next year we can cater for more presentations in a live event in Helsinki.
I want to thank all the speakers and people involved in organizing the event. There are close to 100 registered participants to this webinar, and you represent 28 nationalities from five different continents. To me that’s impressive.
So, I wish you all a fruitful webinar.