The Future of Fast Payments | A

FOCUS NOTE

THE FUTURE OF
FAST PAYMENTS

OCTOBER 2023
B | Fast Payment Systems: Preliminary Analysis of Global Developments

FINANCE, COMPETITIVENESS & INNOVATION GLOBAL PRACTICE

Payment Systems Development Group

© 2023 International Bank for Reconstruction and Development / The World Bank
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CONTENTS

1. SETTING THE CONTEXT   1

2. BACKGROUND: THE EVOLUTION OF FAST PAYMENT SERVICES AND SYSTEMS   2

2.1. Fast payments systems evolution worldwide   3
2.2. Ecosystem Constituents   3
2.3. Fast payments services and segments   3
2.4. Supporting Functions and Overlay Services   7

3. MARKET CONTEXT AND DEVELOPMENT   8

3.1. Market Trends and Forces   8
3.2. Broader Service Innovations   10

4. OPEN BANKING AND FAST PAYMENT SYSTEMS   13

4.1. Implications for FPS design   15

5. CBDC, STABLECOINS, CROSS-BORDER PAYMENTS AND FAST PAYMENT SYSTEMS.   17

5.1. Central Bank Digital Currency and FPS   17
5.2. Possible models for the integration of CBDC with FPS – Illustrative examples   18

6. CONCLUSION  20

7. ACKNOWLEGEMENTS  21

NOTES  22
ii |
1 SETTING THE CONTEXT

The World Bank has been monitoring closely the developments of fast pay-
ment systems (FPS) by central banks and private players across the globe.
This comprehensive study of FPS implementations has resulted in a pol-
icy toolkit.1 The toolkit was designed to guide countries and regions on
the likely alternatives and models that could assist them in their policy and
implementation choices when they embark on their FPS journeys. Work on
the FPS Toolkit is supported by the Bill & Melinda Gates Foundation under
Project FASTT (Frictionless Affordable Safe Timely Transactions). The toolkit
and other relevant resources of Project FASTT can be found at fastpayments.
worldbank.org and consists of the following components:

1. The main report Considerations and Lessons for the Development and
Implementation of Fast Payment Systems

2. Case studies of countries that have already implemented fast payments

3. A set of short focus notes on specific technical topics related to fast pay-
ments

This note is part of the third component of the toolkit. It aims to provide
inputs on the future of fast payments. It is imperative to understand the key
trends and the emerging future of fast payments more broadly, to help cre-
ate a more inclusive and holistic fast payment ecosystem that can adapt to
the changing needs and circumstances of the market and users, as well as to
ongoing globalization and technological advancements.

| 1
2 BACKGROUND

Fast payments are becoming a standard feature of modern ipants or supporting technical providers, or they alter other
payment ecosystems. Consumers and businesses increas- aspects of their governance.
ingly expect to be able to transfer and access money The major end-user advantages of fast payments are
between accounts and institutions across the domestic convenience, speed, and cost. The clearest benefit of fast
economy, and now also internationally, in real or nearly real payments from an end user’s perspective is the ability to
time and around the clock. Low-cost ubiquitous internet complete payments quickly, wherever and whenever neces-
connectivity and computing power, and the sophistica- sary, providing almost immediate access to funds. The direct
tion of client interfaces, such as mobile phone apps, have savings in cost and time are usually significant. There are
transitioned a wide range of commercial and social activity also qualitative advantages in terms of user experience and
online and accentuated the demand for real-time bank- customization. Together, these features of fast payments
ing and payment services aligned with this new environ- have immediate benefits for payees and payers.
ment. In this regard, the global real-time payment market FPS often provide new services and ancillary functions
is expected to grow at a compound annual growth rate of that differentiate themselves from other existing payment
35.5 percent from 2023 to 2030.2 The Asia-Pacific Region systems. FPS operators still serve many of the same seg-
has so far dominated this market, with a share of 38 per- ments and user groups addressed by incumbent systems,
cent in 2020. but competition has induced them to integrate the advan-
Where based on incumbent systems, fast payments tages of modern FPS into new products that motivate
may entail not just technical but also structural changes to uptake and usage. New functions to enhance usability and
the organization, commercial strategy, and governance of security or allow for the design of more bespoke payment
operators and payment service providers (PSPs). Some FPS services have also emerged as FPS ecosystems mature and
are established as greenfield institutions, but the major- become more sophisticated.
ity of FPS have evolved as new initiatives or systems built FPS implementation approaches and ecosystem-de-
within existing institutions. The adoption of an FPS is often velopment strategies vary across markets. Individual fast
motivated by PSPs trying to fulfill new demands from mar- payment arrangements often require new or amended
ket participants in the real economy for new service types, functionalities—for instance, to verify accounts in real time,
quality, and access. In some jurisdictions, non-bank PSPs, enable new third-party payment initiation, and enhance
such as mobile money PSPs, have made inroads but are management of standing orders. While some FPS provide
often constrained by lack of interoperability within the these value-added services themselves, others rely on an
mobile money ecosystem and with the broader financial expanded ecosystem of more specialized payment and
sector. Responding to these market changes, FPS operators technical overlay service providers that build on the under-
often aim at integrating new types of members and partic- lying network and functionality.

2 |
 The Future of Fast Payments | 3

Policy makers welcome the pro-competitive effects that 2.2 ECOSYSTEM CONSTITUENTS
reductions in the costs and delays of interbank fund trans-
fers can have. In many markets, domestic payment systems FPS typically accelerate the evolution of existing ecosystems
have upgraded low-value retail infrastructure and arrange- and the integration of new networks. FPS often support
ments to enhance access and accelerate payment cycles; in the addition of new participant types and/or an expan-
other markets, new systems and arrangements have been sion of the role of indirect participants. They also rely on
established. Across the world, most countries are pursuing an expanded array of technical service providers. New FPS
the development of faster, more accessible, yet secure and functionalities will often require changes to system rule-
efficient retail payment systems. books, standards, and terms and changes also on the side of
Dynamic effects are also unleashed by the advent of system participants.
FPS. The evolution of payment services and adaptation to FPS implementations may expand participation and par-
change have often been slowed by the highly integrated ticipant types. This usually helps in broadening uptake by
and regulated networks through which they operate. Fast harnessing the incentives of other actors in the economy. In
payments have indirectly enhanced the agility of the sec- this regard in India, for example, the UPI system introduced
tor, led to more unbundling of services, and enabled their third-party app providers to provide access for consumers
reconfiguration in ways that tap into economies of scope to initiate and manage payments. Third-party app providers
and scale within and beyond the financial sector. Indeed, include technology firms such as Google, chat application
fast payments represent a structural change that, in coordi- providers such as WhatsApp, and e-commerce players such
nation with other innovations, such as digital ID, will force as Amazon. In other markets, such as in Europe, similar firms
the payment industry to redefine the concept of payments can access an FPS as licensed payment-initiation service
and reassess the range of possibilities for financial services. providers.
A broader ecosystem of technical and business ser-
vice providers is emerging to facilitate the uptake of, and
enhance usage of, FPS. These firms are not formal members
2.1 FPS EVOLUTION WORLDWIDE
or participants of an FPS but may support the banks, pay-
Real-time payment capabilities and systems have been ment institutions, or other licensed PSPs. Both incumbent
around for some time. Several large-value payment sys- and new technology firms play this role of diversifying, cus-
tems have operated in real time for decades, and almost all tomizing, and integrating new channels, overlay services,
countries have at least one system of this kind currently in authentication, and value-added services around the core
operation. However, these real-time payment systems were services offered by an FPS.
typically designed to serve banks and generally are avail-
able only to them and, in some cases, a few other financial
institutions. 2.3 FAST PAYMENT SERVICES AND SEGMENTS
The digital economy and commercial innovations
Fast payments are being adopted to provide a growing
unleashed by the internet have steadily enabled and driven
array of services addressing different segments. Early-stage
demand for interactive, digital, near real-time functionality
implementations generally focus on filling the most basic
and access to funds. Expanding real-time payment capabil-
gaps in the payment industry: Most FPS begin catering to
ities to bank customers has also become more economically
person-to-person (P2P) payments. Once established, how-
viable in recent years. As a result, the deployment of real-
ever, FPS expand real-time functionality to enhance other
time payments for end customers has notably accelerated,
payment types. For example, driven by e-commerce and
and the availability of the systems that process such pay-
mobile phone usage, volumes in more mature systems are
ments—that is, FPS—has been extended to nearly around
dominated by person-to-business (P2B) payments. While
the clock. Some FPS implementations build upon existing
FPS ecosystems continue to evolve, a few prominent new
ACH/RTGS systems. But others, such as the New Payment
service types, supporting functions and business-case
Platform in Australia, have been established as entirely new
deployments, recur across markets. Some examples of these
stand-alone systems, both technically and from an organi-
are provided in charts and tables 1 and 2 in the following
zational perspective. As of June 2023, according to World
subsections. More recently, some national FPS have been
Bank research, about 100 jurisdictions already had a live
interconnected to facilitate cross-border real-time retail
FPS. Many more have plans to implement in the near future.
transactions. FPS also enable request-to-pay (RTP) services
for one-off and recurring billers (for example, subscriptions
and rent), offering consumers control and security.
4 | The Future of Fast Payment

CHART 1 Fast Payments Ecosystem

Direct
participants

Indirect
participants
Payment
service
providers

Government Corporates
Central Bank
Users

Payment
system
operator

Individuals Merchants

TECHNICAL
SERVICE
PROVIDERS*

Tokenization Merchant POS CDS platform Authentication Invoicing

*Examples

TABLE 1 Technical Service Providers Supporting Fast Payments

Service Providers FPS Implications

Merchant service FPS require merchants and vendors to adapt the tools they use to initiate and accept payments and integrate them
providers with their sales, customer-management, and other internal systems. Merchants service providers offer new point-of-
sale devices and other payment acceptance methods, such as QR codes, software services, and value-added services,
for merchants to accept fast payments as viable alternatives to payment cards and other existing payment methods.
Security and FPS may require new forms of client authentication and transaction authorization, including via combinations of
authentication mobile, internet, and point-of-sale devices. New methods to confirm identity and accounts are also needed to pro-
vide for a user-friendly service while ensuring security. Account identifiers are increasingly presented via QR codes
to facilitate payment initiation—where account numbers would be too cumbersome and unsecure.
Payment gateways With increasing choice of payment networks and overlapping domestic and international issuance and acceptance,
payment gateway operators play an important role in helping merchants connect to different systems beyond those
offered by their main bank, possibly including an FPS. Banks are also increasingly devolving acquiring operations
to specialist providers that may have more incentive to commercialize new payment services and adapt them to
specific user segments.
Billing and Fast payments enable enhanced billing and subscription services but require new functionalities and providers to
collections integrate with central systems and overlay services.
API integrators Growth in the array of application programming interfaces (APIs)3 offered by banks and technology companies
has given rise to demand for specialized API service integrators within financial ecosystems to help with evolving
standards, security, and authentications for payments as well as other services. API integrators play an important role
in managing the growth of non-bank payment-initiation services that can be key to the growth of fast payments .
 The Future of Fast Payments | 5

CHART 2 Typical Evolution of Fast Payments

E-money applications Treasury

Online shopping Cash management
Pay at PoS Automated payment
Fast
payment Domestic P2P P2B B2P and G2P B2B Cross-border P2P
system
maturity Payment to Insurancy payments Cross border
friends and family Salary payout payment to
Bill payments friends and family
Direct benefit transfer

TABLE 2 Service Types

PERSON-TO- FPS are frequently used in early stages of deployment to enable real-time domestic P2P transfers and
PERSON payments. Coupled with user-friendly initiation, aliases, and account verification, these transfer services
compete with cash and are often used to make on-the-spot transfers in person or remotely. Common
use-case examples include bill-sharing applications and conversational commerce. The service has
become valuable for making funds available immediately—for example, in unanticipated instances to a
family member or friend. They are also used by smaller merchants or local service providers, especially
in the informal sector, where personal bank accounts are normally used for business purposes.

E-COMMERCE Person-to-merchant or person-to-business payments can now be made instantly in many countries
MERCHANT using the fast payment rails. Payment systems such as UPI in India, SPEI in Mexico, PromptPay in
PAYMENTS Thailand, and the Faster Payments Service in the United Kingdom, among others, offer an RTP service
that facilitates such payments. Merchant payments are becoming a major use case, and the entry of
multiple merchants is expected to bolster fast payments further, making it important for merchants to
be a part of this ecosystem. Additionally, FPS have seen adoption of a variety of retail use cases, such
as deferred payments or “buy now, pay later” (BNPL), digital lending, instant refunds, and electronic
bill presentment and payment.
Over the last decade, there has been a substantial shift in shopping preferences toward online
payments. PSPs globally have been working on solutions to simplify the customer experience. Refunds
are a pain point for both customers and merchants. For example, the lack of transparency and delay in
refund processing (which normally takes five to seven business days and even longer in some cases)
create customer-retention problems for merchants and dissatisfaction among customers. Instant
refunds are now being hosted as a separate service built on top of fast payment services.

REQUEST TO PAY RTP is a real-time method of collecting payments, triggered by the payee. When compared with sim-
ilar mechanisms, such as direct debits and electronic bill presentment and payment, RTP solutions are
viewed as an easier, cost-effective, and faster alternative. Unlike the legacy pull payment mechanisms,
RTP works on a one-off authorization model and does not require a mandate to be set up up front.
The initial phases of a new fast payment implementation start with only the push mechanisms. In
many cases, RTP is introduced as a separate service built on top of the fast payment rail at a later stage,
when the payment framework has matured. FPS in the United Kingdom is an example of an implemen-
tation that started with only a push payment mechanism and introduced RTP as a service much later
as a pull payment feature. Not all RTP are based on pull payments, though: The RTP in Mexico (that is,
CoDi) is a push-type mechanism that was also introduced several years after the launch of SPEI.

SCHEDULED Scheduled payments or standing orders charge a consumer on a recurring basis for a predefined term.
PAYMENTS OR This is commonly used by subscription businesses, online courses, education service providers, gyms,
STANDING salons, internet service or cell providers, insurance companies, and payday loan companies, among
ORDERS many other businesses. With this feature, customers can preauthorize a transaction to be debited from
his/her transaction account later, on a recurring basis.
6 | The Future of Fast Payment

TABLE 2 continued

CROSS-BORDER Several jurisdictions are interlinking their national FPS. Consumers are increasingly expecting the ease
FAST PAYMENTS and immediacy of domestic transfers also to be available between countries. Increased standardization
in payment messaging, including for FPS, across global markets (the use of ISO 20022 is a key example)
enables interoperability and is gradually facilitating end users to transfer funds across borders in close
to real time.
• For example, PromptPay (Thailand) and PayNow (Singapore) have linked their FPS to provide
cross-border payments to their users. A similar arrangement has been made between PromptPay
and Malaysia’s DuitNow.
• In August 2022, the National Payments Corporation of India announced that UPI would become
accessible as a QR code payment solution in the United Kingdom on all PayXpert’s point-of-sale
devices for in-store payments.4
• A specific cross-border initiative for fast payments (project Nexus) is under development by the
Innovation Hub of the Bank for International Settlements. In essence, rather than a payment system
operator building custom connections for every new country to which it connects, the operator
can make one connection to the Nexus platform. By late 2022, a working prototype of Nexus had
already been built and was being piloted to connect three established FPS from the European
Union, Malaysia, and Singapore. Additional FPS are expected to join.

GOVERNMENT Rapid availability of funds and potential integration with wallets and other accounts used by the mass
PAYMENTS AND market make fast payments highly relevant to governments for executing their payments. Indeed, some
DISBURSEMENTS government-to-person (G2P) payment arrangements already use FPS to transfer funds to recipients of
salaries, pensions, subsidies, or benefits. This is the case of SPEI in Mexico, among many others. Further,
in some cases, national ID numbers, mobile phone numbers, and/or other identifiers are being linked
to fast payment services to enable the disbursal of such payments.

BUSINESS-TO- Business-to-business payments are supporting cash-flow management and reducing settlement risks.
BUSINESS PAY- Banks and other PSPs are providing fast payment services to corporations through enterprise resource
MENTS planning integration, significantly increasing rates for straight-through processing. However, a key con-
cern for the modern-day corporate treasurer is the caps or upper limits set on the value of transactions
in most FPS around the world, which might inhibit businesses from using them for business-to-busi-
ness payments. Systems in some markets usually have a cap equivalent to a few thousand US dollars or
lower, while in others such as in the European Union the cap can be as much as €100,000.
 The Future of Fast Payments | 7

2.4 SUPPORTING FUNCTIONS AND OVERLAY processes need to connect multiple parties across the eco-
SERVICES system, including nonparticipant technical providers. These
services that sit on top of FPS and broader ACH services are
Fast payments require new functions to help customers ini- often referred to as “overlay services.” Some examples are
tiate, verify, or manage payments in new contexts, via new outlined below in table 3.
channels and integrated with value-added services. Digital

TABLE 3 Supporting Functions and Overlay Services

ACCOUNT ALIASES An account alias is a unique identifier that is mapped to the number of a payment account held at a
AND CUSTOMER bank or other PSP. Aliases make it easier for customers to identify and label payees and can enhance
DIRECTORIES security by limiting divulgence of account numbers to unverified merchants or third parties. End users
also find it convenient and practical not to have to annotate/enter routing numbers, account numbers,
payee names, addresses, and so on, as these appear in bank records. An alias could be a name, word, or
any combination of alphanumeric and/or other approved characters to reasonably represent and iden-
tify an account holder, including a mobile number. This account alias is unique. To make a transaction,
the payer can enter a beneficiary alias in place of the beneficiary’s account number. For further insights
into aliases, see the World Bank’s 2021 focus note Proxy Identifiers and Databases in Payments.5

CONFIRMATION Confirmation of payee allows a payer to check that the name (including a personal/business account
OF PAYEE indicator) they give for a new payee is the same as the account name/type held by the payee’s PSP.
The payer’s bank or other PSP looks up the mobile phone number entered for the payer’s beneficiary
and receives back their sort code, account number, and account name. They inform the payer of the
account of who the beneficiary is, to confirm the payment. The payer then transfers funds to the cor-
responding payee account, thus reducing chances of mistakes.
As an example, FPS in the United Kingdom supports confirmation of payee with the following four
possible outcomes: (1) Yes: The name and account type you supplied match the details on the account.
(2) No: The name is a close match; the name on the account is “XYZ.” (3) No: The name doesn’t match
the name held on the account. (4) Unavailable: It has not been possible to check the name because
timeout, account does not exist.

QR CODE–BASED QR codes contain payment information for both the payee and its payment provider. The payee is
PAYMENTS AND often a merchant, although QR codes are also used by individuals for P2P payments or transfers. QR
TRANSFERS codes are scanned by smartphones to initiate a payment. Dynamic QR codes are one-time generated
QR codes that usually carry additional transaction-related data (such as the amount) as compared to
static QR codes. QR codes are beneficial in FPS, as the receiver of a payment does not need to share
any identification details of her/his account to the sender, and it reduces errors made by senders while
manually inputting details about the receiver.
In many countries, consumers already take advantage of QR code–based payments. For instance,
the payer may scan the QR code through a third party or participant’s mobile app that facilitates the
connection to their financial institution’s account. In Hong Kong, for example, users of the FPS can exe-
cute payments by scanning a QR code and can also receive money by generating a QR code.6

EXCHANGE RATE For cross-border payments in different currencies, instant foreign exchange services will need to be
CONVERSION provided. This can be provided directly through linked FPS or, eventually, a unified platform, or at a pre-
vious step by the participating banks and other PSPs, under common rules or in a totally independent
manner from the cross-border payment arrangement.

BILLER Billing services require specific overlay services. Subscription-based and recurrent billing services re-
DIRECTORIES quire directories, invoice management, and account-mapping functionalities to enable payees to find,
confirm, and pay their bills or to be addressed properly by requests to pay. These overlay services need
to be integrated with both the FPS and the bank/payment account providers.
3 FAST PAYMENTS IN THE CONTEXT OF
BROADER MARKET EVOLUTION

The decoupling of payment and banking services is digital firms can benefit from the scale and accessibility of
enabling market forces to influence how fast payment ser- well-governed and interoperable retail systems. Further-
vices develop and compete with other payment alternatives more, in several markets, micro businesses such as in-per-
and networks. The overall environment in which FPS are son family shops and street vendors are now in a position,
emerging is multifaceted, dynamic, and evolving in phases. through fast payments and the use of QR codes, to accept
External forces are influencing the landscape for FPS, but electronic payments seamlessly and at a low cost.
fast payments themselves are also influencing the behavior This section briefly outlines some of the exogenous
of market participants and competing payment systems and and endogenous factors influencing the market and the
service providers. demand-side trends shaping FPS service offerings and the
Fast payments address several inefficiencies in legacy business models in which they are integrated.
retail payment services. Apart from making funds readily
available to beneficiaries, in an effort to replicate some of
the benefits of cash, they also enhance access and usabil- 3.1 MARKET TRENDS AND FORCES
ity. And by making fund transfers available to beneficiaries
immediately, they lower hurdles to switching and “multi- Policy Aims and Drivers
homing”—the practice of consumers operating multiple Policy makers can play an important role in reshaping incen-
bank or payment accounts. Built on networks that provide tives, upgrading infrastructure and the regulatory frame-
increasing returns to scale, FPS can not only broaden adop- work in which FPS operate. The following policy initiatives
tion and usage of digital payments but also contribute to can shape the role of FPS:
further declines in the marginal costs of payments. In an • Enhancing efficiency: Alongside aims of protecting
open and more competitive market, this can lead to gains in stability and integrity, most regulators have a mandate
system-level efficiency. to enhance the efficiency of payment services and sys-
At a commercial level, markets are discovering the poten- tems. In many jurisdictions, it is acknowledged that most
tial of real-time payments to be integrated into a growing incumbent PSPs and payment systems have been slow
array of use cases and business models. In both remote as to adapt to, and embrace, innovations that could lower
well as face-to-face transactions, FPS can enhance cashless costs and improve services, or to integrate and address
payment experiences and outcomes for businesses and the the needs of new participants in the economy. Therefore,
satisfaction of their consumers. For example, some “digital some authorities have used various powers to introduce
native” businesses would not be feasible without appro- fast payments and/or to intervene more directly in the
priate payment mechanisms.7 Now, as FPS become more broader development road map for retail payments and
widely available beyond closed proprietary networks, more the market infrastructure supporting them.

8 |
 The Future of Fast Payments | 9

• Regulation of payment services: Reforms are being point of sale; in contrast, FPS functionality is increasing
introduced in some markets to facilitate and properly the ease with which credit transfers (and debits) can
regulate the role of new payment services and service be used by merchants as a viable alternative to card or
providers, such as for innovative payment initiation (for e-wallet payments, as well as cash. Extensive usage of fast
instance, in the European Union), and to evolve the role payments at the point of sale could put downward pres-
of payment wallets or e-money accounts in the broad- sure on existing fee structures for payment cards, such as
er ecosystem. Such changes can alter the market struc- merchant discount rates.
ture in which FPS operate as well as the kinds of services Merchant service providers can harness FPS to offer
and service providers with which they collaborate. Open lower-cost payment acceptance services to retailers.
banking–type regulations are also changing the legal Merchant service providers complement their offer with
framework and rights under which payment services can other value-added services to merchants—for instance,
be offered directly to consumers. integrating payments with loyalty, cash-management, or
user experience enhancements that improve financing
• Data and digital market policy: FPS are a key element
or client spend. In combination with lower transaction
of the financial data ecosystem. As a matter of fact, FPS
fees, this can unleash an increase in fast payments as a
is viewed as a critical payments layer in Digital Public In-
substitute for card payments and potentially put further
frastructure (DPI), and its interoperability with other DPI
downward pressure on card payment fees, and a shift in
layers such as data is indeed important. Policy makers
competition from pricing to value-added services.
are seeking to enhance the control that users have over
their financial data, including transactions. Open banking • Trade in digital services and platforms
promotes innovative payment-initiation services together The growth in demand for retail payment solutions is
with powers for consumers to share consent-based access increasingly influenced by digital firms and platforms
to transaction data held at banks. Many policy makers are that work across borders using highly scalable models
seeking to expand controlled and secure consent-based and with less need for a local legal and operational pres-
access to financial product data. FPS already are core ele- ence in individual markets. Beyond consumer-oriented
ments of a more open financial data ecosystem in which e-commerce, firms are offering a growing array of ser-
all sorts of users and service providers seek to tap into vices, including entertainment, computing, accounting,
more granular payment data on a more frequent basis. marketing, finance, and even logistics solutions on a
FPS operators may be called upon to facilitate access by cross-border basis. It is therefore natural that the pay-
participants to legal and compliance controls as well as ment services they need (for example, to get paid by
provide application programming interfaces (APIs) and users, manage subscriptions, or pay local fees or the few
standardized integrations so that payments are integrated local employees they may have) be made via interna-
with the rest of the evolving ecosystem for digital finance. tional solutions to and from bank accounts held in third
jurisdictions. Fast payments will eventually need to adjust
• Interoperability: Interoperability is key to enhance the
to these dimensions of demand for interoperable fast
reach, usefulness, and usability of all types of bank ac-
payments at the cross-border level.
counts as well as of e-wallets. For example, the Reserve
Bank of India issued guidelines making interoperability Other Market Developments
of wallets mandatory by March 31, 2022, using UPI.
• Data analytics and data-monetization services
Supply- and Demand-Side Considerations As described earlier, the data generated through digital
payments and other digital financial services is of great
• Price and variety of competition in retail payment ac-
interest to platform owners/operators and to a large vari-
ceptance
ety of PSPs and other parties. A growing accumulation of
FPS can adopt different pricing strategies building on
customer data, together with effective new tools to use
some inherent structural differentiators from other forms
this data to analyze behaviors and preferences, is now a
of payment. For example, FPS operators and providers
key value element of the business model of many banks
of fast payment services typically charge fixed fees per
and other PSPs, including big techs that participate in
transaction to participants and end users, respectively.
the provision of payment services.
In several cases, regulators and operators have worked
All these changes are altering the market for pay-
to keep these fees as low as possible, especially for low-
ments significantly, not the least because market dynam-
value payments. Moreover, except for a very few cases,
ics, coupled in some cases with regulatory interventions,
ACH credit transfers have not been readily used at the
10 | The Future of Fast Payment

are pushing for pure payment services to be offered at In India, for example, an interoperable platform based
zero or very low cost, and stakeholders in the payments on USSD was developed connecting all mobile network
industry need to find other means to obtain revenues. operators. This was envisioned for reaching out to the
• Changes in FPS settlement models digitally excluded. USSD allows these customers to check
The majority of the FPS that were first or early movers bank balances, view mini statements, and initiate fund
(that is, early in the past decade or in the mid-2010s) transfers through their feature phones.
opted for the deferred net settlement model, in which
the bank or other PSP of the payee credits the account
of the latter before it receives the corresponding funds 3.2 BROADER SERVICE INNOVATIONS
from the bank or other PSP of the payer. The real-time
Broader trends in retail financial services affect the way in
settlement model has nevertheless become more pop-
which FPS and services are being deployed. Payment pro-
ular for new FPS implementations. In this settlement
cesses and services increasingly need to be adapted to
model, the bank of the payee receives the funds from
specific circumstances with customized financial and non-
the bank of the payer before it credits the account of the
financial value chains and services. An understanding of the
end beneficiary, and all this happens in a matter of a few
key trends transforming finance can be important for the
seconds. For further insights, refer to the World Bank’s
planning of FPS strategy and market development. This sec-
2023 focus note Settlement Models in Fast Payment Sys-
tion outlines some of the more prominent financial services
tems and Implications for Participant Access.8
and business models relevant to FPS deployments.
• Constant evolution of payment initiation
Deferred Payments and Buy Now, Pay Later
As mentioned earlier, in several markets third-party initi-
ation services are already one of the main drivers of ser- BNPL solutions generally offer short-term loans with fixed
vice/experience innovations and overall volume growth payments and no interest and have become a standard
in FPS. Strong customer authentication for payment ini- service linked to new non-card payment services. BNPL
tiation is a well-known challenge of this market develop- services provide customers with short-term credit ser-
ment. Some of the most recent trends in this area include vices, helping overcome situations that lead to abandoned
integrating facial recognition and voice biometrics to fast shopping carts and enabling customers to bridge genuine
payment initiation.9 gaps in working capital. While card payment services often
include credit facilities, FPS require other arrangements to
• Fraud risk management support credit. From a merchant’s perspective, BNPL sig-
FPS enable the immediate and around-the-clock trans- nificantly increases the conversion rates of clients and the
fer of value from payers to payees. Fast payments can average order value. Unlike credit cards, BNPL alternatives
be attractive to fraudsters precisely because of this are usually single-click options for a purchase, capped to a
immediacy, and also because practically any individual, certain amount.
business, or government entity is or can be a payer or Table 4 shows some of the key drivers that have enabled
payee in an FPS, and many are unaware of how they the unprecedented rise of BNPL options globally when
could keep from becoming victims of financial crimes. compared with legacy options for deferred payments, such
Phishing and social engineering, malware, advance per- as credit cards.
sistent threats, and friendly fraud are among the main Some early-stage online payment companies used exist-
fraud techniques. ing interbank credit transfer systems, while others initially
In summary, managing vulnerabilities has grown built closed networks with proprietary wallets to offer mer-
increasingly complex as new and sophisticated security chants alternative e-commerce payment-acceptance solu-
threats have become prevalent. All relevant stakehold- tions. Once established, they layered short-term credit
ers, including regulators, operators, banks, and other services over these payment functions, leading to the BNPL
PSPs, need to be involved in fraud prevention and man- services that offer customers the ability to shop now and
agement. Users also have a significant role to play in pay later in installments.
prevention. Many of the new entrants in the BNPL space from the
• USSD-based payments payment area—Adyen, Klarna, PayPal, and others—have
Despite vertiginous change, USSD technology10 is still embedded the BNPL option on their payment product
useful and even necessary to facilitate fast payment services. In contrast, the availing of the option of equated
transactions for non-smartphone and non-internet users. monthly installments (EMIs) during a product purchase is
 The Future of Fast Payments | 11

TABLE 4 Distinctions between BNPL and Equated Monthly Installments via Credit Cards

Parameters BNPL Equated Monthly Installments via Credit Cards

Revenue model BNPL issuers generate revenue mostly Credit issuers generate revenues from processing fees and interest
through merchant and late-payment fees. charged on credit.
Credit tenure The tenure for BNPL credit is lower than The tenure for credit card repayments varies from 15 to 45 days. Cus-
cards, ranging up to about 60 days. tomers also get the option to convert their repayment into equated
monthly installments, which extend up to 60 months.
Check-out process BNPL options are the most digitally native Credit cards are one of the prominent payment options available on
credit option to be embedded along the merchant check-out page and at brick-and-mortar stores. How-
with certain other payment features and ever, factors such as redirectioning of information (for example, for
options and are in line with the seamless transaction approval) can increase the check-out process time and
one-click check-out process. frictions. In-store payments sometimes experience higher response
times along with transaction drop in certain scenarios.
Credit accessibility BNPL is a relatively flexible way for con- Credit card issuers often set restrictive eligibility criteria for card issu-
sumers to access credit, including some ance. Many consumers may not have access.
who do not have a credit card.
Average ticket size The average ticket size for BNPL is gener- The average ticket size for credit card loans is higher, and the range is
ally lower than for cards and is linked to much broader than BNPL options.
purchases from select merchants.

hosted as a separate service from the core payment rail. Embedded Finance and “Super Apps”
However, the repayment of EMIs is often hosted on the The digital economy is increasing commercial, operational,
core payment rail, in some cases using a RTP service—as an and technical integration between financial- and real-sec-
example, to pull funds from the customer’s account at the tor services. From both, the business and the user expe-
specified due date on periodic intervals. rience perspective, this leads to an expanding array of
FPS services have enabled this kind of service because circumstances in which payments, as well as other financial
(i) they generally charge lower, fixed fees to merchants for services, are “embedded” in real-sector services. In some
online transactions than payment cards and (ii) they enable cases, bigger technology platforms have developed “super
merchants immediately to confirm receipt of funds, or at apps,” such as Grab, PayTM, and Gojek in Asia; Rappi in
least that an irreversible payment has been made to them, Brazil; and Jumia in Africa, that assemble a variety of ser-
therefore enabling them to confirm purchases online in a vices on one platform. But the phenomenon also applies
real-time process, as a substitute for cards. to smaller or more niche platform firms offering services
There are, of course, several downsides to BNPL services. ranging from accounting and procurement to logistics,
In general, BNPL services are not regulated as closely as education, or even social commerce activities—for exam-
credit card loans; therefore, terms and conditions for BNPL ple, within the informal sector.
may vary significantly and be less transparent. Missing or late A key success factor for these platforms has been their
payments will most likely result in late fees and may damage ability to integrate fast payment services into their own site.
a customer’s credit score. Moreover, it has been observed They need to connect all sorts of users, partners, and pro-
that people using BNPL services will tend to overspend on viders. Early movers set up their own closed-payment wallet
items they would not normally be able to afford if they had networks. With the advent of open network FPS, super apps
to pay up front. This can lead to excessive debt that may be now have other means to fulfill payments between actors
difficult to manage. Indeed, in the United States, for exam- on the platform. They provide APIs and open data architec-
ple, a report issued by the Consumer Financial Protection ture to emulate rich data flows that FPS providers or third
Bureau in March 2023 found that users of BNPL services parties can use to add overlay services.
were far more likely to have bank overdrafts, payday loans, FPS have now enabled other smaller platforms to
pawn loans, and other high-interest financial products, indi- embed payments without the need to build their own pro-
cating that they are more financially vulnerable than nonus- prietary payment networks. Big techs have gained tech-
ers of BNPL financing. nical access to some FPS to initiate payments and offer
in-app payments in a range of contexts, including chat
apps (for example, WhatsApp in India and Brazil)11 or for
smaller commerce sites.
12 | The Future of Fast Payment

Digital Lending • Expanded digital billing channels and formats: With the
FPS may be integrated by new and incumbent financial addition of various channels and formats, billers can stay
institutions as they streamline credit value chains and pro- ahead of the competition with the inclusion of technol-
cesses, including to disburse and collect payments. In loan ogy-savvy channels, such as conversational commerce,
underwriting, digital solutions have enabled lenders to intelligent personal assistants, and text messaging.
eliminate manual processes related to loan applications and • Accelerated cash flow: FPS make customer receipts
approvals for both retail and business consumers. As part of more quickly available for cash flow, enabling businesses
the lending process, disbursements and loan repayments to track payments in a more efficient manner.
are being made by new payment options that reduce reli-
ance on legacy payment rails, such as checks and ACH pay- Social Assistance and Benefit Transfers
ment methods. Many countries provide social assistance payments to poor
Traditional banking and non-banking institutions along and vulnerable individuals. The last-mile delivery of these
with digital lending applications are integrating with FPS for G2P payment flows relies heavily on the efficient func-
faster disbursal of loans to customers. This has emerged as tioning of payment systems, on whether beneficiaries are
one of the key selling propositions. financially included, and on the overall development of the
Furthermore, payment data—including data generated payment and the broader financial ecosystem. Thus, in the
by FPS—is being used extensively by scoring models to national context, the availability and usage of various pay-
enhance information about consumer behavior, needs, and ment options constitutes an important piece for delivering
risk. Alternative scoring models use data from digital appli- G2P payments effectively. Social assistance payments have
cations and platforms about consumer behavior for credit been one of the areas in which PSPs have not felt incentiv-
risk assessment. This data complements credit bureau data ized enough to boost innovation due to low revenues and
and internal lender assessments. From a demand perspec- higher up-front costs for achieving the required volume
tive, alternative scoring models enable more borrowers with penetration.
no credit history to gain access to credit with a key focus Recently, as a response to the COVID-19 pandemic, gov-
on ability, stability, and willingness to repay as key eligibility ernments implemented an array of social assistance pro-
factors in the underwriting process. grams requiring efficient payments. Reliance on modern
and scalable payment frameworks increased. For example,
Cash Management and Payments for Small and Medi- the Thai government started using its FPS solution, Prompt-
um-Sized Enterprises Pay, to deliver social assistance payments to accounts linked
The digitalization of businesses’ financial and cash-man- with valid national IDs. FPS can be especially valuable for
agement operations is leading to demand for more inter- G2P services because (i) they are highly interoperable; (ii)
active and bespoke payment solutions. From invoicing they enable beneficiaries to obtain near instant access to
and accounts payable to salary and customer claims, FPS funds, which is especially helpful during natural calamities;
services are finding increasing opportunities to enhance and, (iii) in several cases, transaction costs are lower than
business financial management. While not all payments those of other retail payment systems.
must be completed in real time, many ancillary functions From a user experience standpoint, a key element for
and payment types—such as account sweeps, third-party governments is providing the appropriate choice of pay-
initiation, RTP, e-invoicing, subscription management, and ment methods. Beneficiaries of social assistance programs
collections—are steadily becoming more readily available to may want to choose from fund transfers via fast payments
even small enterprises. As the internal systems (for example, or via traditional ACH services, use of checks, and cash.
enterprise resource planning) and cash-management solu- Including fast payment options in the framework provides
tions used by small and medium-sized enterprises evolve, scalability and enhancement. With a wide range of payment
FPS services are likely, as part of a more comprehensive methods, beneficiaries are likely to have more options to
offering, to become more relevant and to integrate even- use their funds electronically, which would reduce pressure
tually with more related services and technologies. Some on cash logistics and increase beneficiary convenience. Use
integration features include the following: of electronic payments in general—and of fast payments in
• Electronic presentation of invoices and integrated pay- particular—in the G2P context will nevertheless depend on
ments: Allows customers to have all required information the country’s infrastructure and the level of maturity of its
in their device and, eventually, execute payment instantly. digital financial services.
4 OPEN BANKING AND FAST PAYMENTS

Open banking generally refers to regulatory frameworks payment context. Payment-initiation services enable pay-
that govern access by third-party providers to customers’ ees or payers to authorize a third-party payment provider
bank account data and to initiate and manage payments (TPP) to interface with their bank to initiate a payment. In a
on behalf of such customers. This enables service provid- regulated environment, if consent is properly obtained and
ers to offer applications that can lead to more efficient and the payment initiator is duly licensed, the bank holding the
transparent services and options.12 In many jurisdictions, this client’s account may not have a right to refuse such access.
covers payment services increasingly referred to as “pay- While a merchant acquiring bank may have an interest in
ment initiation.” These services may be provided by exist- promoting card payments, a TPP could enable merchants
ing banks and PSPs or by new firms that seek authorization to request payments via FPS services instead of the card
to provide specifically just these services. Many of these network. TPPs offering payment initiation can provide con-
services also exist outside the framework of open banking sumers with more choice for using different instruments to
regulation. But in such contexts, they may involve bespoke pay from their bank account.
bilateral agreements and standards with limited interop- Open banking and APIs provide many useful services and
erability. Open banking structures normalize some of the functionalities to end users. These include account aggre-
service integrations and commercial relationships that are gation, payment initiation, merchant payments, transac-
already proliferating between banks and a range of third- tion history, business-to-business payments, e-commerce
party providers. payments, authentication, account balance, bill payments,
Open banking arrangements can both benefit from and profile management, P2P payments, and reversals, among
enhance the impact of fast payments. Around the world, others.14 For example, UPI in India provides tools for authen-
well over 50 countries13 have implemented or are develop- tication and authorization that provide a connection to all
ing variants of open banking that can enhance access to the parties of the transaction, helping customers use FPS
payment systems and facilitate consent-based access to from any location at any time. Apps also allow smartphone
customers’ data held at banks and other financial institu- users to choose from multiple accounts to make such trans-
tions. (See chart 3.) Payment systems sit at the heart of this fers. Further, Deutsche Bank and Serrala have created an
expansion in access and variety. interface through which companies can conduct cross-bor-
Payment initiation unbundles payment instruments from der and domestic transactions while also giving the compa-
account servicing. Typically, banks exercise significant con- nies access to the European Union’s SCT Inst. Table 5 shows
trol over the type of payment method or instrument avail- additional examples of the use of open banking and APIs in
able to merchants or billers and to consumers in a specific the context of fast payments.

| 13
14 | The Future of Fast Payment

CHART 3 Open Banking in Selected Markets

Implementation Timeline

2016 2017 2018 2019 2020 2021 2022

3rd party app access extended Development of account aggregator framework

OPEN BANKING
UK Open Banking phased
UK issues report: development and implementation
Open Banking
Implementation
Entity (OBIE) formed

Transposition Development of technical

PSD2 into national standards
law

Jan 2016, PSD2 enters

Jan 2016, PSD2 enters
into force, transposition Consumer Data Rights
into force, transposition
running to Jan 2018 come into force
running to Jan 2018

Central Bank of Mexico Mexico’s open Mexico’s open banking

issues Fintech Law banking regula- regulation issued
tion issued

Soft launch of the KFTC

open banking services

May 2020 Banco Central do

Brasil announces phased
implementation

MAS and ABS launch sgfindex, for consumers SgFindex

to retrieve and share their personal financial data
Bank of Israel
Bank of Indonesia
SNAP
Bangko Sentral NG
Filipinas
June 2021 BSP
issues Open Finance
circular

TABLE 5 Examples of Open Banking Use Cases

Customer services
Participant
use case for Personal Customers for Business Customers
Account Account Enable customers to view finances Accounting Enable business to integrate banking
information aggregation across different institutions via single platform services with their accounting and
sharing (e.g. interface integration enterprise resource planning systems
balance, Credit Enable customers to share financial data Cash forecasting Enable business to use third party
transaction decisioning with third parties to inform/enhance analytics for cash management
history) credit risk assessment, e.g. for loans optimiation
Payment Wallet Enable customers to top-up wallet Accounts Enable business to better manage cash
initiation top-up through different accounts and payable / management and reconsiliation pro-
service (e.g. channels receivable cesses across different applications
bank transfer) Credit Enable customers to access credit Merchant Enable business to offer new payment
card payments payments mechanisms to customer, different
rates and loyalty services
 The Future of Fast Payments | 15

4.1 IMPLICATIONS FOR FPS DESIGN incumbent banks in their governance, FPS operators and
their overseers may need to consider how to align interests
FPS need to be prepared to enable these innovative pay- with new stakeholders from the open banking community.
ment-initiation services. There should be clarity on how pay- In an open banking framework, an FPS may need to
ment-initiation services and TPPs are dealt with within the consider extension of participation. Beyond banks, there
regulatory framework. Some TPPs may already be licensed may be payment account providers offering e-money or
PSPs with direct access to an FPS. In other jurisdictions or similar services that need to be integrated in order for open
systems, they may need to be accorded technical or spon- banking to benefit an FPS. Especially in emerging markets,
sored access, or a new determination might be required the uptake and usage of semi-closed-loop payment wallets
to align their services with the FPS rules and regulations. or e-money solutions is significant. These services are cap-
If open banking stipulates a role for third-party payment turing an important share of low-volume retail payments
initiation, there must be appropriate means for TPPs to within proprietary ecosystems. These systems may not yet
interface legally and on fair commercial terms with an FPS be connected to an FPS or have an interest in promoting
and its participants. interoperability. FPS governance and strategy should con-
Technical and operational features of an FPS may need sider the role of these proprietary systems not only as PSPs
to adapt to enable open banking services. Payment-initia- but as payment initiators.
tion services may specialize in enhancing consumer expe- Technically, the integration of open banking services
rience that requires dynamic verifications of accounts and within an FPS ecosystem will require alignment on API
balances. They may support bespoke interfaces, recurring standards and security standards for authorization and
payments, reversals, or subscriptions that require overlay authentication. FPS will need to enable developers to
services to be integrated with an FPS—for instance, to establish communication between their own apps and the
map aliases, confirm account owners in real time, man- information systems of the FPS operator and/or the PSP.
age individual confirmations, and support payment types, API standardization promotes trustworthiness and reliabil-
such as RTP. ity. Standardization of APIs for functions such as payments
Commercially, there are significant opportunities for or submission of reports (to the regulator) can reduce
open banking to boost FPS volumes. Typically, FPS have duplication of functionality and lead to cost optimization
fixed fees for transactions and fees that are lower than card by promoting reuse.
networks. TPPs may be able to use the differences in fee There are also significant implications for participating
levels to attract merchants to switch payments from card banks and financial institutions. They may need to make
networks to an FPS, especially if they also provide concur- related investments in data monitoring and security. For
rent value-added services. TPPs may also be able to offer example, an API gateway may need to be created to pro-
consumers other benefits—such as in the form of better vide an additional layer of security to the API calls. Further,
user experience, loyalty, or other value-added services—to beyond up-front costs, open banking also entails ongoing
switch payment behavior from incumbent cards or wallets costs as banks operationalize open banking offerings.
toward FPS services. However, given the significant role of
16 | The Future of Fast Payment

TABLE 6 Use of APIs in the Context of Fast Payments in Selected Jurisdictions

Australia The New Payment Platform (NPP) API Framework defines the key technical approach and mandatory data attributes for
NPP APIs, aligned to ISO 20022. It is designed to support interoperability and standardization. APIs play an important role
in helping innovators and third parties to use NPP’s capabilities. While NPP Australia does not mandate the use of this
framework, it encourages NPP participants, third-party service providers, and software developers to refer to this frame-
work or build further upon it when developing API solutions for NPP transactions.
European The Berlin Group is a pan-European payment interoperability standards and harmonization initiative with the primary
Union, Israel objective of defining open and common scheme- and processor-independent standards. It was formed in 2004, well
before the advent of legislation for the second European Payment Services Directive (PSD2) but has evolved to take an
important role in developing common API standards for the payment-initiation and account information services defined
under PSD2.
While the initial goal of the Berlin Group was to meet the aims of the European Central Bank, the European Commis-
sion, the European Payments Council, and (more recently) the Euro Retail Payments Board with regard to the Single Euro
Payment Area, its standards have been adopted, or used as a baseline, more broadly by jurisdictions outside the Eurozone
and the European Union, including Georgia and Israel.
Mexico Limited APIs are provided by Banco de México. The FPS SPEI allows use of limited-purpose APIs for value-added services
such as checking transaction status and retrieving transaction details. CoDi, the overlay RTP service, also runs on an array
of APIs that are open to all SPEI participants. Furthermore, Banco de México is considering allowing access to third-party
open APIs.
United Under the framework developed by the Open Banking Implementation Entity, three types of licenses are granted: AISP,
Kingdom PISP, and CBPII. Payment initiation, account aggregation, and card-based conformation of funds, among other services,
are provided through these licenses. The scope of the payment initiation includes domestic, international, schedule future
dated, and standing-order payments.
The open banking framework covers technical and nontechnical elements, such as customer experience guidelines,
operational guidelines (to track and monitor APIs developed by banks), dispute-management process, liability framework,
TPP accreditation process, conformance testing tool, dynamic client registration, API monitoring tool, and security speci-
fications.
Source: World Bank, Considerations and Lessons for the Development and Implementation of Fast Payment Systems: Part of the World Bank
Fast Payments Toolkit (Washington, DC: World Bank Group, 2021).
5 CENTRAL BANK DIGITAL CURRENCIES
AND FAST PAYMENTS

Other emerging trends in payments and technology have This is because, at least from a conceptual standpoint, retail
disrupted even such basic concepts as money and currency. CBDCs could be seen as alternatives to fast payments. For
Traditionally, money has been described as anything that example, a retail CBDC could in principle fill the gap where
can serve as a store of value, a unit of account, and a means the digitalization of payment is still not possible or where
of exchange.15 From another perspective, money itself has the interoperability between FPS is a barrier to efficient and
evolved as a concept over time from the rocks and shells cost-effective transactions, such as cross-border payments.
used in a barter system to metallic money, banking money, Others believe that CBDCs and fast payments would not have
currency issued by a central authority, and, finally, digital to compete against each other, and that FPS could actually
money. Central bank digital currency (CBDC) is a form of end up being used as the payment rails for CBDCs. Indeed,
money that has emerged lately and is being explored by an efficient and easy-to-use CBDC fundamentally needs to
several countries. be built on a payment rail that is available 24 hours a day,
seven days a week, 365 days per year to issue and redeem
CBDC in real time. Given the nature of retail CBDC, an FPS
5.1 CENTRAL BANK DIGITAL CURRENCIES could be an efficient underlying mechanism to enable users
AND FPS to achieve an interoperable, immediate, and cost-effective
way to exchange retail CBDC with the money held in their
A CBDC is a form of money issued by the central bank. It PSP accounts.
is issued originally in digital form, and like cash, it forms Nevertheless, in a 2018 report on CBDCs, the Commit-
a liability on the central bank that issues it. CBDCs can be tee on Payments and Market Infrastructures considered
designed to be wholesale or retail in nature, just as some that in many countries—especially those with high levels of
traditional payment systems have been designed for whole- financial inclusion—the existing FPS already provides much
sale activity (that is only financial institutions being able to of the expected benefits for retail payments of CBDCs in
access) and retail activity (that is, individuals and businesses terms of efficiency and convenience. One notable exception
would have access). is cross-border retail payments, which are generally slower,
Growing attention to CBDCs has also created a need less transparent, and more expensive than domestic retail
to understand the payment systems that may coexist with payments.16
them or that may be required to facilitate their circulation.

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18 | The Future of Fast Payment The Future of Fast Payments | 18

5.2 POSSIBLE MODELS FOR THE is still not feasible via other solutions (eg, remote areas with
INTEGRATION OF CBDCS WITH FPS: limited Internet connectivity). For instance, the retail CBDC
ILLUSTRATIVE EXAMPLES in Nigeria, e-Naira, also supports transactions using the
unstructured supplementary service data (USSD) technol-
Depending on whether a country has an existing FPS or ogy for text messages in the country, and it is expected to
retail CBDC system, there are different ways to think about be used by low-income people who use feature phones and
integration and not creating silos. For instance, in the mainly live in a cash-based ecosystem.
euro area, there has been discussions to reuse as much In general, there are different ways that CBDC and FPS
as possible of existing European payments standards and systems could be integrated and communicate with each
scheme rules for the potential launch of a digital euro. other. Three options are presented below:
Specifically, relevant scheme rules from the SEPA Instant
Credit Transfer scheme (SCT Inst) and European QR stan- • In the first option, the PSP of the payer is in both pay-
dards are expected to be used for the digital euro system, ment systems; hence, the PSP of the payer would debit
as well. As such, the interlinkages can be at different levels the CBDC account of the payer and send the transaction
of the system/arrangement (e.g. infrastructure, overlay ser- directly to the FPS system, debiting the PSP and credit-
vice, scheme). In the same vein, the Central Bank of Brazil ing the PSP of the payee, which would credit the payee,
is exploring how to add new features to its existing Pix and the PSP of the payer would act as the intermediary
infrastructure, and how it could interoperate with existing between the two payment systems.
or new payment solutions and systems.
• In the second option, the PSP of the payee is in both
If carefully designed and regulated, CBDC and FPS can
systems. The PSP of the payee would receive the funds
indeed co-exist, helping achieve full digitalisation of pay-
in the CBDC system from the payer directly or from the
ments by, on the one hand, replacing cash usage and not
PSP of the payer and credit the e-money or bank account
cannibalizing each other, and on the other hand, main-
of the payee, and the PSP of the payee would be the
taining the role of the central bank in the digital economy.
intermediary.
CBDC can fill the gap where the digitalization of payment

CHART 4 Options to Achieve Retail CBDC and FPS Integration

Debit Alice wallet

and credit PSP A
CBDC wallet PSP A
(CBDC network)

Payment request PSP B credits

PSP A via FSP PSP B Bob account
(FPS scheme) (FPS scheme)

Settlement
through RGS
OPTION 1
Payment
request Debit Alice wallet
from Alice and credit PSP A
CBDC wallet
PSP A PSP B
(CBDC network) (CBDC network)
Payment request
via CBDC network PSP B credits
(Settle in CBDC) Bob account
Alice PSP B
(CBDC wallet) (FPS scheme)
OPTION 2 Bob
(transaction account)

Central Bank Central Bank 1. Debit CB Credit

(CBDC network) (FPS scheme)
PSP B FPS
2. Settlement in RTGS

PSP A PSP B
(CBDC network) Bridge
Debit Alice wallet (FPS scheme) PSP B credits
and credit PSP A Bob account
CBDC wallet OPTION 3
19 | The Future of Fast Payment The Future of Fast Payments | 19

• In the third option, a third party that is neither the financial institutions to transfer funds from and to the
payer PSP nor the payee PSP, most probably the cen- CBDC system. The relevance is mostly because the cen-
tral bank, would act as the intermediary between the tral bank could have infinite liquidity in the domestic
two systems. The central bank would receive the funds currency in any payment system, and there is no credit
from the PSP payer in the CBDC system and credit the risk when the central bank performs the intermediation
PSP of the payee in the FPS. It could be very relevant role, as the central bank will never become insolvent in
for the central bank to act as the intermediary among the domestic currency.
6 CONCLUSION

Innovations in payments have multiplied at a gravity-defy- Retail payment trends such as digital lending and
ing pace. FPS across the globe have been implemented to deferred payments present an opportunity to payment
fill the gaps in the payment industry and continue to evolve schemes, financial institutions, and overlay services to mon-
and adapt to changing market dynamics. In fact, safe and etize and increase their customer base by offering services
efficient fast payment services are no longer just an option above and beyond the reach of traditional payment chan-
but a necessity, given the observed large demand from con- nels. Banks have been investing heavily in the development
sumers and businesses. of open banking for sharing and leveraging customer-per-
While initially most FPS were launched to support real- missioned data with third-party developers and firms to
time and around-the-clock domestic P2P fund transfers, build applications to provide more efficient and transparent
use cases have expanded drastically in recent years. This services and options in banking. On the other hand, innova-
is explained mostly by technological progress, chang- tions such as digital currencies have caught the eye of both
ing expectations, and the increased adoption of fast pay- central banks, which are researching its probable usage as
ments by a growing number and diversity of end users. The a fiat currency that can be transferred cheaply and quickly,
COVID-19 pandemic was also an accelerator of these trans- and private-sector players.
formations. FPS operators, regulators, and participants need to track
Increased standardization in payment messaging across these digital innovations closely and leverage them to en-
global markets is enabling interoperability and gradually hance customer experience together with the overall safety
permitting users (both businesses and consumers) to trans- and efficiency of the system. Indeed, a good understand-
fer funds across borders in close to real time. The interop- ing of the key trends transforming the payment market and
erability between payment providers both domestically and financial industry more broadly is critical for the planning of
across different jurisdictions is expected to grow multifold an ongoing FPS-development strategy, including for enabling
in the coming years. its extensibility and scalability and continued improvements
in service for all stakeholders, including end users.

20 |
 The Future of Fast Payments | 21

7 ACKNOWLEDGMENTS

Organization Contributor
PwC India PwC India
World Bank Harish Natarajan
Ivan Daniel Mortimer Schutts
Jose Antonio Garcia Luna
Claudio Ceresani
Holti Banka
Nilima Ramteke
Ahmed Faragallah

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 NOTES
1. According to the Committee on Payments and Market Infrastructures, a fast payment can be defined
as a payment in which the “transmission of the payment message and the availability of ‘final’ funds
to the payee occur in real time or near-real time on as near to a 24-hour and seven-day (24/7) basis as
possible.”
2. Grand View Research, “Real-Time Payments Market Size, Share and Trends Analysis Report by Enterprise
Size (Large, SME), by Payment Type (P2B, P2P), by End-Use Industry, by Component, by Deployment,
and Segment Forecasts, 2023–2030,” https://www.grandviewresearch.com/industry-analysis/real-time-
payments-market.
3. In essence, an API defines how software components communicate with one another.
4. It is possible that the RuPay card scheme (that is, India’s largest card ecosystem) is also part of this
project. For further details, see NPCI International Payments Ltd., “India’s NPCI International Signs
PayXpert as UK’s First Acquirer for UPI and RuPay,” press release, August 18, 2022, https://www.npci.
org.in/PDF/npci/press-releases/2022/NPCI-Press-Release-India%E2%80%99s-NPCI-International-signs-
PayXpert-as-UK%E2%80%99s-first-acquirer-for-UPI-and-RuPay.pdf.
5. This focus note is part of the World Bank Fast Payment Toolkit. The note is available at https://fastpay-
ments.worldbank.org/sites/default/files/2021-10/Proxy_Identifiers_Final.pdf.
6. Standard Chartered, “Faster Payment System (FPS)” (web page), https://www.sc.com/hk/bank-with-us/
sc-pay/#apptoapp.
7. Early in the internet era, companies such as Alibaba integrated their own closed-loop proprietary pay-
ment solutions as a necessary element of their operations.
8. This focus note is part of the World Bank Fast Payment Toolkit. The note is available at https://fastpay-
ments.worldbank.org/sites/default/files/2023-05/Settlement%20Note_Final_April%2020.pdf.
9. In some cases, for example, the systems of the PSPs or of third-party payment initiators are already able
to generate unique sound/voice tones, which in turn generate and send the relevant information from a
certain payment-initiation device to the actual point of sale to initiate a payment.
10. USSD is a technology commonly used for communication between GSM handsets and mobile network
operators’ back-end computer systems. It can be used on any phone, including feature phones.
11. WhatsApp, “Learn More about Participating Countries” (web page), https://faq.whatsapp.com/general/
payments/learn-more-about-participating-countries/?lang=en.
12. Bank for International Settlements, “Report on Open Banking and Application Programming Interfaces,”
press release, November 19, 2019, https://www.bis.org/press/p191119.htm.
13. As of 2022, this includes, among others, Australia, Bahrain, Brazil, Chile, Colombia, European Union
member states, Georgia, India, Indonesia, Korea, Malaysia, Mexico, Nigeria, Pakistan, the Philippines,
Thailand, Turkey, the United Kingdom, and Uruguay.
14. APIs can also enable smoother reconciliation processes. For example, SWIFT offers services within its
network to track payments through APIs.
15. Reserve Bank of Australia, “What Is Money?” (web page), https://www.rba.gov.au/education/resources/
explainers/what-is-money.html.
16. Committee on Payments and Market Infrastructures, Central Bank Digital Currencies (Basel: Bank for
International Settlements, 2018), 7.

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