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Pricing in fast payments: a practical and theoretical overview

Author

Listed:
  • José Aurazo
  • Holti Banka
  • Guillermo Galicia
  • Nilima Ramteke
  • Vatsala Shreeti
  • Kiyotaka Tanaka

Abstract

Fast payments are at the forefront of payments digitalisation globally. By enabling immediate availability of funds on a 24/7 basis, they offer the potential to enhance efficiency, promote financial inclusion, drive innovation and foster competition. Despite their growing adoption, key questions remain regarding the design of fast payments systems (FPS), particularly concerning pricing. Open issues around pricing of fast payments exist at three levels: between the FPS owner and participants (system level), among participants themselves (participant level) and finally between the participants and their customers (end user level). This paper provides a comprehensive overview of global practices in FPS pricing at these three levels. To relate these practices with the academic literature, particularly for the person-to-merchant (P2M) payments, we use a classical two-sided market model and analyse how different pricing schemes at the end user level might influence the volume of fast payments and overall social welfare. Our expository model shows that fast payment usage may be lower than socially optimal in many cases. Moreover, when all fees are zero, fast payments are unsustainable without external subsidies or alternative revenue streams for participants.

Suggested Citation

  • José Aurazo & Holti Banka & Guillermo Galicia & Nilima Ramteke & Vatsala Shreeti & Kiyotaka Tanaka, 2025. "Pricing in fast payments: a practical and theoretical overview," BIS Working Papers 1295, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1295
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    References listed on IDEAS

    as
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    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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