The challenge

The Payments and Post-trade industries are undergoing unprecedented levels of change. New technologies, digital currencies, disruptors and liquidity requirements are putting financial systems under further pressure and costing the industry hundreds of millions a year.

FMIs (Financial Market Infrastructures) and their members need to understand the impact of these changes before they are made, in order to design, build and maintain optimal payment systems.

The solution

FNA’s solutions cover the full FMI lifecycle as it responds to the evolving regulatory environment, modernization programmes and new market entrants such as CBDCs. The solutions support each phase of this journey from research, regulatory approval and design & build to validation, stress testing and monitoring. 

The Payment Simulation solution models any payment or settlement system, enabling FMIs to rapidly test new technologies, features, changes or stresses to their systems without writing a single line of code. This leads to better system design, reduced system development costs, increased speed of deployment, member engagement and accelerated acceptance and smoother regulatory approval.

FNA’s experience within FMIs is unparalleled, having built simulators and developed systems for almost 25 years for clients such as Fnality, Payments Canada and Bank of England.

 

Lifecycle components

  • Research & Design: Simulate and evaluate the design of new payment systems and Liquidity Saving Mechanisms (LSM). 
  • Regulatory approval: Model and simulate your payment ecosystem to allow regulators to evaluate potential liquidity and risk impacts.
  • Member engagement: Prove liquidity and risk reduction benefits to members and build custom member dashboards to improve participants’ visibility of both their own and system payment flows. 
  • Accelerate Build: Simulate the design of the system to discover issues ahead of the build and testing phase. 
  • Monitoring: Monitor and detect anomalies within your payment system via automatic alerts and real-time views of payment flows.
  • Stress testing: Stress test your payment system and members for liquidity, operational and concentration risks.
  • Model validation & testing: Use FNA’s simulations for quantitative and qualitative model validation and test the impacts of planned changes to your payment system parameters.

Payment System Stress Testing 

The regulatory and supervisory environment following the 2008 crisis significantly raised the standards for effective liquidity management. Under the Committee on Payment and Settlement Systems (CPSS) and International Organization of Securities Commissions (IOSCO) principles for financial market infrastructures (PFMIs), the requirements for routine stress testing can be costly and time-consuming. 

FNA’s Payment System Stress Testing enables FMIs to comply with these standards at reduced cost and time resources. The solution helps FMIs to better understand both the operational and financial stability implications of participants’ stresses on other participants in the system. In addition, FMIs can determine how resilient their system is on any given day and identify individual participants which might face liquidity or solvency issues in the near future. 

Liquidity risks can proliferate rapidly into wider, more damaging issues.  Start monitoring and testing straight away, so that potential undetected problems can be addressed before they escalate.

Key features

The Payment Simulation solution can be configured using a wide range of features, including:

  • Simulate thousands of business days with the proven FMI Simulator™ and generate the same economic and/or operational output as the real systems
  • Deploy patented liquidity saving mechanisms
  • Visualize and communicate findings with FNA Dashboards™
  • Run simulations using real or synthetic data
  • Model endless combinations of configurations and datasets
  • Select multiple data outputs to analyze and fully understand the impact of the simulated system change
Rhomaios Ram, CEO of Fnality
“Using the FNA Platform, we have been able to simulate the transformational effects which the USC will be bringing to the industry and therefore determine the significant liquidity benefits of the proposed service. This insight has enabled us to prepare, design and communicate exactly how our service will work”

Related research, news & events

Anomaly Detection of Fraudulent Large-Value Payments
This piece was written by Amanah Ramadiah and Riccardo Marcaccioli (Data Scientists at FNA), and Kimmo Soramäki (FNA’s CEO). When Machine Learning Meets Network Science Suppose Alice makes a new payment to Bob. A moment later, Alice makes another new payment to Chuck. Can we know if either of the two transactions are suspicious? The […]
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The Global Network of Payment Flows
By Samantha Cook & Kimmo Soramäki. The paper, ‘The Global Network of Payment Flows‘, offers a descriptive analysis of Payment Networks created by SWIFT MT 103 messages. SWIFT MT 103 messages are the most commonly sent SWIFT message types and provide a valuable measure of global economic activity. Within the payment network, nodes represent countries. […]
Read more >

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