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Money and Payments Infrastructure: understanding the plumbing

Author

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  • Bidder, Dr Rhys

    (Central Bank of Ireland Research Affiliate)

Abstract

This article provides a comprehensive analysis of the infrastructure that underpins both traditional and emerging payment systems. It establishes a consistent framework for comparing different modes of settlement, distinguishing between public money (cash and reserves) and private money (bank deposits and stablecoins). The paper begins by describing traditional European infrastructure, focusing on the TARGET framework and the two-tier monetary model, where commercial bank deposits expand upon central bank reserves. It details how these traditional systems—including card networks and correspondent banking—ultimately rely on central bank money for final settlement. The paper then explores the disruption caused by blockchain technology and stablecoins, highlighting a fundamental difference: while traditional payments require coordinated interbank adjustments in reserves, stablecoins operate as bearer assets that settle directly on-chain without immediate recourse to central bank systems. Finally, the paper discusses the interaction of these frameworks and the modernization of the two-tier model through tokenized deposits and central bankrun DLT initiatives.

Suggested Citation

  • Bidder, Dr Rhys, 2026. "Money and Payments Infrastructure: understanding the plumbing," Quarterly Bulletin Articles, Central Bank of Ireland, pages 1-52, March.
    • Handle: RePEc:cbi:qtbart:y:2026:m:03:p:1-52
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    File URL: https://www.centralbank.ie/docs/default-source/publications/quarterly-bulletins/quarterly-bulletin-signed-articles/money-and-payments-infrastructure.pdf?sfvrsn=2a44731a_6
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    References listed on IDEAS

    as
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    4. Susan Herbst-Murphy, 2013. "Clearing and settlement of interbank card transactions: a MasterCard tutorial for Federal Reserve payments analysts," Consumer Finance Institute discussion papers 13-02, Federal Reserve Bank of Philadelphia.
    5. Anneke Kosse & Marc Glowka & Ilaria Mattei & Tara Rice, 2023. "Will the real stablecoin please stand up?," BIS Papers, Bank for International Settlements, number 141.
    Full references (including those not matched with items on IDEAS)

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