#12: The Application of Digital Twins within Payment Systems

3 Aug

12th August 2023

With:

| Kimmo Soramäki (FNA)

| Martin Kyle (Payments Canada)

In Session #12, Martin Kyle (CISO at Payments Canada) and Dr. Kimmo Soramäki (FNA) explore how digital replicas are transforming the lifecycle of high-value payment systems. As Payments Canada worked to modernize its core infrastructure, including the Lynx interbank system, the use of a Digital Twin proved essential for de-risking the build and ensuring that complex liquidity-saving mechanisms performed as expected before going live.

The discussion shifts from traditional simulation to the concept of the "Living Model." Our guests explain how these twins ingest real-world data to create a hyper-realistic mirror of financial ecosystems. This allows authorities to stress-test for cyber-outages, model the impact of new CBDC designs, and streamline the regulatory approval process by providing evidence-based proof of a system’s resilience.

The session covered:

The Living Replica: Defining the Digital Twin as a dynamic model that evolves alongside its real-world counterpart, rather than a one-off research simulation.
Modernizing with "Lynx": Lessons from Payments Canada on using Digital Twins to validate the design of its new high-value payment system.
The Regulatory Fast-Track: How high-fidelity simulations provide the "burden of proof" required by regulators to approve systemic changes.
CBDC Sandbox Testing: Using Digital Twins to evaluate the macro-financial impact of a retail or wholesale CBDC without risking the stability of the existing currency.
Liquidity Bottleneck Prevention: Identifying "liquidity sinks" and testing new settlement algorithms to optimize the flow of funds across the network.
The Data Requirements: Discussing the balance between using sensitive historical transaction data and high-quality synthetic data to feed the model.

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