4.3 Payment systems development requires continuous input

The Bank of Finland’s oversight tasks include the assessment of system risks, policy work to promote payment efficiency, and analysis that supports these tasks. The Bank of Finland plays an active role in the continuous development of payment systems. Summer 2022 saw the creation in Finland of the national emergency account system, a collaboration between various authorities to secure daily payments in the event of serious disruptions and in emergencies.

The national emergency account system is a backup system that allows cash withdrawals, credit transfers and debit card payments. It can be used in situations where the systems and payment systems normally used by credit institutions, such as TARGET2 or EBA Clearing, are not available for several days.

The backup arrangement is based on the Act on Certain Backup and Emergency Arrangements in the Financial Sector (666/2022 (in Finnish)).

Bank of Finland published its guiding principles on electronic payments in May 2022

The Bank of Finland published its guiding principles on electronic payments at the Payments Forum (in Finnish) in May 2022. They summarise the Bank’s views on efficient payment systems.

The guiding principles reflect the retail payment strategies of the European Commission and the European Central Bank (ECB).

Instant payment gives consumers more options

Instant payments are bank transfers in which funds are transferred from the payer’s account to the payee’s account in just a few seconds at any time of the day or night on any day of the year.

In October 2022, the European Commission published a proposal for a Regulation (COM(2022)546) to promote instant payments. According to the proposal, entities offering a euro credit transfer service would also have to offer a service for sending and receiving instant euro payments, with the price charged for this consistent with credit transfers.

The objectives of the Euro Retail Payments Board (ERPB) focus especially on promoting instant payments and the clarity of account information for customers. At a meeting held in September 2022, the Finnish Payments Council considered that the promotion of instant payments would require more extensive cooperation on the part of different operators.

Instant payment should give customers more options and be of benefit to both payers and payees. The Finnish Payments Council set up a working group to establish an instant payments concept for the Finnish market, and the work is continuing in 2023.

The Payments Council also set up a monitoring group to ensure transparency for retail payments end users. Payment service providers play a key role, as do the commercial sector and companies, in particular.

International cooperation and protecting financial sector services from cyber risks are more important than ever

Russia’s war in Ukraine and Finland’s NATO membership progress have increased the threat to Finland’s critical infrastructure in both the physical and the cyber environment.

The reported attacks on the National Cyber Security Centre suggest that Finnish organisations are more and more frequently being targeted directly, which underlines the importance of protection and testing.

In 2022 the Finnish financial sector continued with its data security testing under the TIBER-FI framework with both Finnish operators and the other Nordic countries.

Diverse analysis supports the Bank of Finland’s oversight activities and policy work

Payment technologies are such that it would be possible to create payment systems that facilitate global trade. However, cross-border payments in different currencies have been the slowest area of all to develop.

In October 2022, the Bank of Finland published a Bank of Finland Bulletin article on a G20 initiative to make foreign payments of companies and consumers more efficient (in Finnish). The planned project will mainly involve big companies that have a large number of international payment transactions.

The Bank of Finland Bulletin article on the pandemic’s role in accelerating the decline in cash use and increasing online shopping payments (in Finnish) examined changes in the payment habits of Finnish and euro area consumers during the COVID-19 pandemic.

According to the ECB’s SPACE study, on which the article was based, the use of cash at points of sale between 2019 and 2022 declined in Finland to a level lower than in the other countries of the euro area, although over half of Finns think it is important to be able to pay in cash. At the same time, the acceptance of cash at points of sale has decreased in Finland to one of the lowest levels in the euro area.

In 2022 the Bank of Finland continued to develop its payment and settlement system simulator (BoF-PSS3) and consulted the Bank of Namibia in a quantitative analysis of the payment system.

At the end of August, the 20th simulator seminar was held in Helsinki. The central banks of Poland and Namibia, among others, presented the analyses they had conducted using the BoF-PSS3 simulator. A training course was also organised in conjunction with the simulator seminar for new users of the BoF-PSS3 simulator.

2022 also saw the continuation of a development project in which the Bank of Finland, together with the ECB, is to provide the Eurosystem with a new analysis environment and simulation software for TARGET services.

The simulator is also being used for the Bank of Finland’s own analysis work. The counterparty and liquidity risks that banks face in payment systems are examples of the areas where oversight is linked to the central bank’s financial stability function and the work of the Financial Stability Authority.