The Topology Of Payment Flows Between Provinces Over HVPS

Transactions are paid in monetary form in market economy with modern financial system. And the basic form of economy is the transactions of goods and services which are paid in monetary form. Therefore, payment and settlement systems are needed to make sure the transfer is done successfully.Payment systems are financial arrangements by which funds are transferred from one side to another side, which consist of payment and settlement system, payment instrument, organizations supplying payment services and supervision institution. Payment systems are, therefore a key part of financial infrastructure and a core means of financial service. Payment and settlement systems are the main facilities for transferring monetary claims and assets between financial institutions.Payment and settlement systems generally take on a hierarchical structure where different types of transactions are handled in different systems. Obligations arising from these systems are settled in interbank settlement systems. The RTGS level is generally the highest level as most other systems eventually settle on this level.The infrastructure has gradually grown into a complicated interactive network of systems that transfer claims and assets at the domestic and international level. Integration of these systems has resulted in critical interdependencies. The characteristics of different payment and securities settlement systems are difficult to analyze with traditional econometric tools and econometric models are often too general to describe systems at the level of detail needed to capture differences arising from various design parameters.A payment system can be treated as a specific example of a complex network. In recent years, the physics community has made significant progress towards understanding the structure and functioning of complex networks. The literature has focused on characterizing the structure of networked systems and how the properties of the observed topologies relate to stability, resiliency and efficiency in case of perturbations and disturbances. With globalization moving ahead, payment networks are expanding rapidly and the actors are becoming increasingly interdependent. Understanding the network characteristics of the expanding payment and settlement systems have become key issues for central bank oversight.The paper explores the network topology of the interbank payments transferred between provinces in China over the HVPS. First, it investigates the characteristic of the payment flows between provinces over HVPS, and then a complex network is modeled based on the payment flows. And next, it compares the graph of value network to the graph of volume network, and then estimates the power exponent of link weights and node strength distribution respectively based on maximum likelihood estimation and K-S Test. It also explores the influence of the threshold over the power exponent of node strength. In the end of this paper it analyzes the assortative mixing and clustering coefficient of the networks.It is concluded that HVPS was closely related to the development of country's economy. The networks share many of the characteristics commonly found in other empirical complex networks, such as a scale-free degree distribution, low clustering coefficient, and the network tended to be disassortative like many other technological networks. Value network and volume network also had several differences, such as power exponent, the graph of network and the stability.This paper is divided to five sections.Section one describes the background and significance of the topic, and also reviews domestic and international researches on payment and settlement system in recent years, and then introduces the research content and methods.Section two analyzes payment and settlement systems which includes payment systems, payment and settlement system, CNAPS (China National Automatic Payment System) and HVPS (High Value Payment System), and informs the important role of HVPS in payment systems and financial system.Section three of this article presents the complex network theory and power law distribution. In the process it also reviews literature in the field and presents applications of the ideas presented.Section four analyzed the characteristic of the payment flows between provinces over HVPS.Section five studies the topology architecture of value network and volume network. First part of this section is analysis of the graph of value network and volume network; the second part estimates the power exponent of link weights and node strength distribution respectively; the last part assesses the effect of threshold to the power exponent of node strength.Section six studies the assortative mixing and clustering coefficient of the networks; it also assesses the effect of threshold to the correlation and clustering coefficient.There are two innovation points. One of them is studying payment system with complex network theory in China and the other is exploring the topology architecture of payment flows between provinces over HVPS.