World Bank: Fast Payments and the Role of Central Banks

Posted on Jun 21, 2023 by Andrea Monteleone, Payments Consultant, and Holti Banka, Senior Financial Sector Specialist, World Bank Group

Fast Payments: A Disruptive Innovation[1]

In just one year of operations, Brazil’s fast payments system, Pix, became its most used payment instrument, recording 120 million users and 10 billion transactions. Today, 9 out of 10 small businesses rely on Pix. For most of these businesses, it is their main payment method.

In Thailand, the domestic fast payment system, PromptPay, is estimated by ACI Worldwide to generate an additional economic output equivalent to 2 percent of Thailand’s forecasted GDP in 2026, resulting from increasing transactions and associated net savings for consumers and businesses.

In India, fast payments were developed to pursue the vision for a “less-cash” economy through higher accessibility. As of March 2023, 400 banks are live on the Unified Payments Interface (UPI), with nearly 9 billion transactions carried out using the infrastructure in a month alone.

These successful fast payment systems (FPS) exemplify the transformative potential of fast payments. Also known as instant, real-time, or immediate payments, these payments are primarily characterized by the real-time (or near real-time) transmission of the payment message and the availability of final funds to the payee, possibly on a 24/7 basis.

Fast payments are an important layer in digital public infrastructures — i.e., foundational systems back boning the provision of essential functions and services in a modern society — with the potential to drive economic growth and sustainable development.

Fast payments can indeed:

  • Boost financial inclusion and operate as a key for users to access the broader universe of financial services. Fast payments could reduce the average gender gap of 6 percentage points affecting developing economies both in account ownership and usage of digital payments. These payments can provide women with new opportunities to access money, obtain a greater degree of control over their finances, and more broadly favor women’s business ownership and empowerment. Compared to other payment services, fast payments are indeed more affordable, safe, and convenient and as such they are easier to be adopted by women. Additionally, they reduce transaction and logistic costs (to reach agent locations), which can represent significant barriers to adoption for women. A similar impact is produced in rural and remote areas, where fast payments can remediate for the shortfalls of traditional financial services, including the limited access to traditional financial institutions in these areas.
  • Foster competition and innovation between payment service providers (PSPs), including banks and non-traditional players such as microfinance institutions, e-money providers, and fintechs.
  • Improve time-critical payments, such as the delivery of social assistance programs by the government during times of emergencies. For example, fast payments can reach the more vulnerable segments of the population in case of natural disasters or pandemics.
  • Deepen and expand the acceptance of digital payments, especially by small and micro businesses. Fast payments allow these merchants to accept payments faster and at a lower cost. Moreover, fast payments can leverage advanced contactless and checkout channels (such as QR codes, NFC, Bluetooth) to optimize the payment process and consequently drive an increase in sales.
  • Enable efficiency gains in the forms of greater speed and transparency at lower cost in multiple types of payment transactions, both domestically and internationally.

In the case of cross-border remittances, which constitute an important income source for many families in developing economies, fast payments can help ...

[1] Contributors: Nilima Ramteke (Senior Financial Sector Specialist, World Bank) and Thomas Piveteau (Payments Consultant, World Bank). Affiliation: Payment Systems Development Group (PSDG), part of the Finance Competitiveness and Innovation Global Practice (FCI) at the World Bank.

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