Bank of Finland pioneers the European-aligned instant payment system embracing the digital Euro, shaping the future of seamless transactions in Finland.
Bank of Finland’s Push for European-Standard Instant Payment Solution
The Bank of Finland (BOF) is at the forefront of driving innovation in the payment landscape by spearheading the development of a Finnish instant payment solution aligned with European standards. This proactive move aims to cater to the evolving payment preferences of consumers in the digital age.
At this year’s fifth Euro and economy publication event on October 19, Tuomas Välimäki, a member of the Governing Council of the European Central Bank (ECB) and a board member of the Bank of Finland, emphasized the institution’s active role in fostering the development of innovative payment methods.
Despite the increased circulation of physical cash, Välimäki acknowledged the diminishing use of cash for transactions in both Finland and Europe. In Finland, cash now represents less than ten percent of daily transactions, making it evident that digital payments have become the preferred choice for most.
The Vital Role of the Digital Euro in Europe’s Payment Landscape
While digital payments are on the rise, the digital Euro, which is being planned as an alternative payment method, holds significance as one of the most critical ongoing projects in European payment systems. Välimäki highlighted that the core objectives of the digital Euro align with the Eurosystem’s responsibility to maintain the reliability and efficiency of payment and settlement systems significantly as cash usage diminishes.
However, Välimäki also underscored the importance of ensuring continued access and convenience for those who still rely on cash for their day-to-day financial activities. In this context, he pointed out the European Commission’s initiative, supported by the ECB, to safeguard the role of cash, reinforcing the commitment to preserving the option of using euro banknotes and coins.
Promoting Competition and Financial Inclusion
Välimäki emphasized the need for diversifying payment infrastructure, particularly in light of recent developments in the Baltic Sea region. The dominance of a small number of non-European card companies in the daily payment market raises concerns about resilience. The introduction of the digital Euro has the potential to enhance operational security and provide merchants with better negotiation leverage in payment service pricing, thus improving competitive conditions in Europe.
Moreover, Välimäki clarified that the digital Euro is intended primarily as a medium of exchange and not an investment vehicle. The Bank of Finland aims not to shift household deposits from commercial banks to the Eurosystem’s balance sheet. Instead, its commitment is to ensure that the potential issuance of digital euros does not jeopardize financial stability. This may involve imposing restrictions, such as maximum limits on digital euro account balances, to achieve this.
By embracing European standards and encouraging competition, Finland is poised to develop a resilient, inclusive, and forward-thinking digital payment ecosystem that caters to the diverse needs of its citizens while aligning with the broader European payment landscape.