EconPapers    
Economics at your fingertips  
 

Instant payments as a new normal: Case study of liquidity impacts for the Finnish market

Matti Hellqvist and Kasperi Korpinen

No 7/2021, BoF Economics Review from Bank of Finland

Abstract: The amount of central bank money, or liquidity, needed to settle payments, depends on the way the settlement is organized. It is largest when payments are settled individually on gross basis and smallest with settlement in one big netting cycle. Retail payments are increasingly processed in instant payment schemes and systems. We evaluate how the result of this transition affects the liquidity needs of the Finnish banks. For the analysis we generate artificial transaction level data, which mimics the Finnish retail payment flows processed in the STEP2 system. This allows us to estimate the difference between the liquidity needs for the settlement in a cycle based model and in a full instant payment mode. We also present a regression model for the bank level additional liquidity needs. A full migration to instant payments is expected to cause only a small aggregate increase in the liquidity needs. However, the variations between banks or between days can be significant and emphasize the need of liquidity buffers.

Keywords: instant payments; liquidity needs; payment systems; netting (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ban, nep-mac, nep-mon, nep-pay and nep-reg
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/243289/1/1773399977.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofecr:72021

Access Statistics for this paper

More papers in BoF Economics Review from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2025-03-20
Handle: RePEc:zbw:bofecr:72021