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Person-to-business instant payments: Could they work in Colombia?

Author

Listed:
  • Arango-Arango, Carlos A.

    (Principal Researcher and Adviser, Central Bank of Colombia, Colombia)

  • Ramirez-Pineda, Ana Carolina

    (Payments Systems and Banking Operations Adviser, Central Bank of Colombia, Colombia)

  • Restrepo-Bernal, Manuela

    (Specialised Professional, Central Bank of Colombia, Colombia)

Abstract

More than 60 countries have already implemented instant payment systems. However, in many cases they have been limited to person-to-person transactions. This study looks at the challenges that instant payment systems may face in developing economies like Colombia as they advance further into the person-to-business (P2B) transaction space. Using a survey of Colombian merchants, the study explores the factors associated with merchants’ propensity to adopt instant payments and identifies those associated with the adoption of electronic payment alternatives. The study finds that instant payment systems will require a broad strategy if they are to penetrate the P2B space, as they will have to compete with the low marginal costs and immediacy offered by cash and the high levels of informality in the commerce sector, especially for micro businesses. Furthermore, instant payment systems will have to meet merchants’ high expectations with respect to enabling access to other financial services, enhancing competitiveness and increasing their bottom line.

Suggested Citation

  • Arango-Arango, Carlos A. & Ramirez-Pineda, Ana Carolina & Restrepo-Bernal, Manuela, 2021. "Person-to-business instant payments: Could they work in Colombia?," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 15(4), pages 376-397, December.
    • Handle: RePEc:aza:jpss00:y:2021:v:15:i:4:p:376-397
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    References listed on IDEAS

    as
    1. Marc Rysman & Scott Schuh, 2017. "New Innovations in Payments," Innovation Policy and the Economy, University of Chicago Press, vol. 17(1), pages 27-48.
    2. Marc Rysman, 2007. "An Empirical Analysis Of Payment Card Usage," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 1-36, March.
    3. David Bounie & Abel François & Leo Van Hove, 2017. "Consumer Payment Preferences, Network Externalities, and Merchant Card Acceptance: An Empirical Investigation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(3), pages 257-290, November.
    4. Aurazo Jose & Vega Milton, 2021. "Card Acceptance by Small Merchants: An Application of the Tourist Test to Peru," Review of Network Economics, De Gruyter, vol. 20(2), pages 101-137, June.
    5. Fumiko Hayashi & Ying Lei Toh, 2020. "Mobile Banking Use and Consumer Readiness to Benefit from Faster Payments," Economic Review, Federal Reserve Bank of Kansas City, vol. 105(no.1), pages 1-5, April.
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    Cited by:

    1. Hernando Vargas, 2022. "Some thoughts about the issuance of a retail CBDC in Colombia," BIS Papers chapters, in: Bank for International Settlements (ed.), CBDCs in emerging market economies, volume 123, pages 49-64, Bank for International Settlements.

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    More about this item

    Keywords

    instant payments; faster payments; mobile payments; cash and electronic payments; merchants; retail payments; cards; bank transfers;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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