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Fragmentation and Concentration within the International Payments, System – Risks, Challenges, Opportunities

Author

Listed:
  • Iulia-Monica Oehler-Șincai

    (Department of International Economic Analysis, Institute for World Economy)

  • Claudia Gabriela Baicu

    (Department of Economic Integration and Financial Markets, Institute for World Economy)

  • Sorin-Nicolae Curcă

    (Department of International Economic Analysis Institute for World Economy)

Abstract

This paper underscores the dynamic and complex context of international payments, with the aim to identify specific forces, risks and challenges behind current megatrends. It underlines also the opposite tendencies of fragmentation and concentration within the international payments system. Fragmentation is due to three main categories of factors: differences in regulation, difficulties of interoperability and lack of common standards; variety of participants, with different objectives and goals; geopolitical tensions, which may lead to the emergence of parallel payment systems, which do not interact with each other. Concentration within the international payments system is reflected by the market power of specific private actors, especially big technology companies (BigTechs), but also financial technology actors (FinTechs). This concentration is also evidenced by the overwhelming share held by the most used currencies in global payments. Our paper argues that the ideal international payments system should provide fast, cheap, safe, transparent and cyber resilient services. At the same time, financial stability, deterrence of illegal activities and the level playing field should be ensured. The qualitative analysis that is the basis of this paper takes into account multiple perspectives, including demand side, supply side and regulators.

Suggested Citation

  • Iulia-Monica Oehler-Șincai & Claudia Gabriela Baicu & Sorin-Nicolae Curcă, 2022. "Fragmentation and Concentration within the International Payments, System – Risks, Challenges, Opportunities," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 10(2), pages 35-45, December.
    • Handle: RePEc:ntu:ntugeo:vol10-iss2-35-45
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    References listed on IDEAS

    as
    1. Igor Makarov & Antoinette Schoar, 2022. "Cryptocurrencies and Decentralized Finance (DeFi)," NBER Working Papers 30006, National Bureau of Economic Research, Inc.
    2. Gambacorta, Leonardo & Khalil, Fahad & Parigi, Bruno, 2022. "Big Techs vs Banks," CEPR Discussion Papers 17649, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    international payments system; fragmentation; concentration; digital currencies; cryptocurrencies; stablecoins; sanctions;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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