Money and payment in 2023

The Bank of Finland’s tasks include the assessment of system risks, work to promote payment efficiency, and analysis that supports these tasks. In payment and settlement systems, the priorities for 2023 were national preparedness and the future of European payments.

Cash services and fostering instant payments

Finland is developing a model for instant payments that will be compatible with European standards

Instant payment refers to a credit transfer that can be made in real time and around the clock, every day of the year.

Payment services provided in Finland have lacked an instant payment service available to all consumers with uniform conditions. In addition, a payment instrument that is not dependent on payment card rails would promote competition and resilience in the field of payments.

A Payments Council working group created a model that would enable the achievement in Finland of the objectives set by the Eurosystem and the European Commission for instant payments. In May 2023, in connection with the Payments Forum (in Finnish), the working group published a report that outlines the key elements of the model.

In September 2023, the next phase of the project began, with the objective of producing a rule book for instant payments in Finland and a governance model suitable for its maintenance and management.

The project is scheduled to be completed by summer 2024, after which it will be essential to ensure the launch of the service.

Bank of Finland wishes to safeguard a sufficient level of cash services

One of the core tasks of the Bank of Finland is to maintain the cash supply and issue banknotes in Finland. The Bank of Finland acts in cooperation with other parties involved in cash supply to ensure the availability, authenticity and fitness of banknotes.

The issuance of banknotes and coins increased in Finland, but, following the peaks of 2022, demand flattened out to the level seen during the pandemic. Particularly in the summer and at the end of the year, the amount of cash ordered from the Bank of Finland exceeded the amount of cash returns.

There have been no major changes in access to cash and cash availability compared to previous years, even though the decline in cash payment is causing challenges to maintaining the cash network.

The results of the Bank of Finland consumer survey conducted in spring 2023 show that 90% of consumers are satisfied with the availability of cash. Some of the smaller businesses, in particular, are no longer accepting cash payments, however. Still around 40% of consumers consider that having the option of paying by cash is very or fairly important.

The Bank of Finland proposed in 2022 that a sufficient level of cash services must be safeguarded in Finland by legislative measures. In 2023, the Ministry of Finance launched a review of the need for a reform of regulations concerning basic banking services and credit institutions, and the European Commission adopted a legislative proposal on the legal tender of euro banknotes and coins, to safeguard the role of euro cash. The Bank of Finland participated in the discussion both in Finland and in the Eurosystem.

The use of counterfeit euro cash in Finland was low in 2023. A total of 653 counterfeit euro banknotes were detected among banknotes in circulation. This represented a slight increase from the previous year but is still very moderate.

Euro banknotes will be redesigned

Croatia adopted the euro on 1 January 2023, when it became the twentieth member of the euro area. The Bank of Finland signed an agreement with Forex on the exchange of Croatian kuna banknotes for euros, and in January–February 2023 no fees were charged for changing the currency.

The ECB is engaged in a redesign process for the euro banknotes. In summer 2023, the ECB surveyed the public’s preferences for the themes of the new banknotes. Based on the preferences expressed by euro area citizens, the ECB’s Governing Council in November chose two possible themes for the next stage of the redesign process: ‘European culture’ and ‘rivers and birds’.

Bank of Finland raised public awareness of cash and cash supply in 2023

The Bank of Finland organised annual banknote seminars in March 2023 in Helsinki and Jyväskylä. These focused on the identification of euros and foreign currencies, as well as the prevention of money laundering and counterfeiting.

In December, the Bank of Finland published four short videos on the Bank of Finland’s cash supply and cash. These present the life cycle of banknotes from the perspective of the cash supply in Finland.

Development of payment and settlement systems

New T2 payment system is the core of central bank money

The TARGET2 payment system, which was launched in Finland in 2008, was replaced on 20 March 2023 with the new T2 system. The new system provides enhanced liquidity management tools for banks and includes the ISO20022 payment messaging standards that enable a higher level of automation.

The T2 payment system is used by the Bank of Finland’s monetary policy counterparties and other Finnish and Nordic credit institutions, central securities depositories and central counterparties.

In 2023, the average daily value of payments settled by the Bank of Finland’s participants in the T2 system (and in TARGET2 up to 19 March 2023) was approximately EUR 81 billion.

Euroclear Finland migrated to the T2S securities settlement platform in 2023

T2S (TARGET2-Securities) is a securities settlement platform developed by the Eurosystem and has a total of 24 participant central securities depositories in 23 European countries. It enables real-time delivery-versus-payment (DvP) settlement of securities in central bank money.

The Bank of Finland is the overseer of Euroclear Finland and, together with the Eurosystem, is responsible for providing T2S services in Finland as part of the TARGET services.

In 2023 the Bank of Finland, together with the ECB, prepared for Euroclear Finland’s migration to the T2S system and aided its T2S counterparties in their deployment of the system. The system was introduced successfully on 11 September 2023, and Finnish securities transactions have since been settled using T2S.

Digital euro project entered preparation phase in 2023

A digital euro would complement cash and would extend the options available for consumers and businesses for different forms of payment. It would ensure that the single currency is available to people and businesses in the euro area, in both physical and digital form.

No decision on whether to ultimately issue a digital euro has yet been taken, however.

The key objective of a possible digital euro is to support the role of central bank money as a monetary anchor, strengthen Europe’s strategic autonomy and promote competition and payment efficiency within the euro area.

In October 2023, the two-year investigation phase of the digital euro project was concluded and the ECB Governing Council took the decision to start the next phase of the project, the two-year preparation phase.

In the investigation phase, the Eurosystem confirmed high-level technical product specifications and user requirements as the digital euro project’s guidelines, which will lay the foundation for future preparations.

The key aim of the preparation phase is to prepare for the actual development of a digital euro, and to lay the foundations for enabling potential future design and preparation work by payees and payment service providers.

The Bank of Finland took an active role in 2023 in the preparation of a digital euro.

The most important decision-making body in the project is the High-Level Task Force, where the Bank of Finland is represented by Member of the Board Tuomas Välimäki.

The Bank of Finland participated in groups that support the work of the High-Level Task Force, and the project was also promoted by the work of Eurosystem standing committees.

TARGET services and international cooperation

TARGET services adapt to changing times

TARGET services are market infrastructure services provided by the Eurosystem. These services include liquidity management and payment settlement (T2), services for instant payments (TIPS, TARGET Instant Payment Settlement) and securities settlement (T2S, TARGET2-Securities).

The Bank of Finland provides TARGET services to the Nordic banking sector as part of its statutory tasks.

A feature common to all TARGET services is the real-time settlement of payments or securities transactions in central bank money, which means that because of the central bank’s role, the transactions are risk-free.

TARGET services enable the smooth flow of cash and securities in Europe and support the implementation of the single monetary policy.

As a member of the Eurosystem, the Bank of Finland participates actively in the development of TARGET services in the Market Infrastructure Board and its working groups. The Bank of Finland is the national centre of expertise for TARGET services and thus supports its own customers in questions concerning the use of the system. It also coordinates the operation and testing of the system and ensures its smooth functioning in the event of disruptions.

Bank of Finland and ECB provided the Eurosystem with a new analytical environment for TARGET services in 2023

In 2023, the Bank of Finland, together with the ECB, provided the Eurosystem with a new analytical environment and simulation software tool for TARGET services.

This is already the Bank of Finland’s second simulator software delivery to the Eurosystem. The simulation tool operates in the ECB’s analytical environment and is based on the general-purpose BOF-PSS payment and settlement system simulator developed by the Bank of Finland.

At the end of August 2023, the 21st international simulator seminar was held in Helsinki. The Bank maintained the tradition of organising a training course in conjunction with the simulator seminar, for new users of the BoF-PSS3 simulator.

International cooperation continued to be strong in 2023. The Bank of Finland conducted three international consultations for the central banks of various countries on the introduction of the simulator.

In addition, the Bank of Finland and the International Monetary Fund (IMF) together started an analysis project in which the simulator is used for estimating the scale of damage from cyber threats to payment systems.

Bank of Finland participating in the development of a unified collateral management system

The unified Eurosystem Collateral Management System (ECMS) is a system for managing assets placed as collateral with national central banks in monetary policy operations. These are assets that are currently processed in the systems of 20 national central banks.

During 2023, the Bank of Finland supported its monetary policy counterparties in the preparations for the launch of the ECMS.

Due to challenges related to system testing, the ECB Governing Council decided in November 2023 to reschedule the launch date of the ECMS to November 2024.