Pricing in fast payments: a practical and theoretical overview

José Aurazo, Holti Banka, Guillermo Galicia, Nilima Ramteke, Vatsala Shreeti and Kiyotaka Tanaka

No 1295, BIS Working Papers from Bank for International Settlements

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.

Keywords: financial inclusion; digital payments; fast payments; interchange fee; pricing (search for similar items in EconPapers)
JEL-codes: E42 G28 O3 (search for similar items in EconPapers)
Date: 2025-10
New Economics Papers: this item is included in nep-fle and nep-pay
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