Competing digital monies
After decades of relative stability in the market structure of retail payments, new contenders are vying to challenge bank deposits as retail money. These contenders include the private tokens of digital platform operators, such as big techs; private stablecoins; and digital forms of cash. Beyond this, some central banks have launched fast payment systems, which allow for instant payments between account holders with existing bank deposits and, in some cases, non-bank payment service providers.
Contribution
We consider the implications for the market structure of a world where digital means of payment compete. We look specifically at how new non-bank digital platforms compete with bank deposits, with or without public sector provision of digital money or payment infrastructures. To do this, we draw on both two-sided market theory and payment economics. Based on a theoretical model, we assess the likely impact of competing digital monies and of public infrastructures on the industrial organisation of payments.
Findings
We have three key results. First, when payment systems are not interoperable (“walled gardens”), access to accounts (financial inclusion) and trade volumes are inefficiently low. Second, when a fast retail payment system ensures interoperability between payment systems, financial exclusion disappears at the cost of some degree of disintermediation. Incumbent intermediaries lose market share to non-bank payment service providers. Third, we show that digital forms of cash and retail fast payment systems can have equivalent effects. Both help to achieve an outcome superior to the laissez-faire approach, ensuring that different payment instruments are interoperable.
v role=”contentinfo”>
Keynote address by Agustín Carstens
–
BIS Quarterly Review
–
Working paper
Related content
© Bank for International Settlements. All rights reserved. Permission is granted to use, reproduce or distribute this work subject to the terms of this licence.
Your use of this website is subject to the terms and conditions contained in the Legal Information section. BIS – Bank for International Settlements (2025). The BIS is an international financial institution owned by central banks which “fosters international monetary and financial cooperation and serves as a bank for central banks”. Navigation, search.
The views expressed in this publication are those of the authors and not necessarily those of the BIS.
Summary
Focus
After decades of relative stability in the market structure of retail payments, new contenders are vying to challenge bank deposits as retail money. These contenders include the private tokens of digital platform operators, such as big techs; private stablecoins; and digital forms of cash. Beyond this, some central banks have launched fast payment systems, which allow for instant payments between account holders with existing bank deposits and, in some cases, non-bank payment service providers.
Contribution
We consider the implications for the market structure of a world where digital means of payment compete. We look specifically at how new non-bank digital platforms compete with bank deposits, with or without public sector provision of digital money or payment infrastructures. To do this, we draw on both two-sided market theory and payment economics. Based on a theoretical model, we assess the likely impact of competing digital monies and of public infrastructures on the industrial organization of payments.
Findings
We have three key results. First, when payment systems are not interoperable (“walled gardens”), access to accounts (financial inclusion) and trade volumes are inefficiently low. Second, when a fast retail payment system ensures interoperability between payment systems, financial exclusion disappears at the cost of some degree of disintermediation. Incumbent intermediaries lose market share to non-bank payment service providers. Third, we show that digital forms of cash and retail fast payment systems can have equivalent effects. Both help to achieve an outcome superior to the laissez-faire approach, ensuring that different payment instruments are interoperable.
