Instant Payments: Regulatory Innovation and Payment Substitution Across Countries

IMF Working Papers, November 18, 2022

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Instant, or fast, payments are credit transfers completed and settled within seconds or minutes.
They have low costs, reduce payment risk, and have significantly replaced the use of cash, cards, or check and direct debit payments.
The paper notes the role played by regulators in promoting instant payments and identifies instances of significant payment instrument substitution across 12 advanced and emerging market economies.
This substitution reflects the realized demand for attributes offered by instant payments.
As these attributes are quite similar to those for CBDC, the demand for retail CBDC (if issued) may be less compelling.

Instant payments offer transaction completion and settlement within seconds or minutes.
Instant payments exhibit low costs and reduced payment risk relative to other instruments.
Significant substitution away from cash, cards, checks, and direct debit has occurred in a sample of 12 advanced and emerging market economies.
The observed substitution indicates realized consumer and merchant demand for the specific attributes of instant payments.

Regulators have played an active role in promoting instant payments.
Regulatory innovation is linked to the uptake and substitution effects observed across countries.

The analysis identifies instances of significant payment instrument substitution across 12 advanced and emerging market economies.
The substitution documented reflects realized demand rather than solely speculative or theoretical benefits.

Attributes of instant payments are quite similar to those proposed for retail CBDC.
Given the realized demand for instant-payment attributes, demand for retail CBDC (if issued) may be less compelling.

Subject: Financial markets, Payment systems
Keywords: direct debit payment, Europe, instant payment, Instant payments, payment risk, payment share, payment substitution, Payment systems, regulatory innovation

IMF Working Paper No. 2022/228 — Instant Payments: Regulatory Innovation and Payment Substitution Across Countries