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"This paper studies the desirability of programmable payments where transfers are automatically executed conditional upon preset objective criteria. We do so by studying optimal payment arrangements in a framework that captures a wide range of economic relationships between two parties. Our framework stacks the cards in favor of programmable payments by considering an environment without legal recourse. The results show that the optimal payment arrangements for long-term economic relationships consist predominantly of simple direct payments. Direct payments increase the surplus by avoiding the liquidity cost of locking-up funds from the moment where the payer commits the funds in a programmable payment until the moment where the conditions are satisfied to release those funds to the payee. Programmable payments will be desirable, and may in fact be the only viable payment arrangement, in situations where economic relationships are of a short duration. "

According to McKinsey, digital payment transactions grew rapidly in emerging markets during the past two years, as the pandemic accelerated shifts to contactless payments and e-commerce. E-wallets proliferated, real-time account-to-account transfers took off, and industry players formed new partnerships to access capabilities and broaden their customer base. Some of the fastest growth occurred in Africa and Southeast Asia, where low banking penetration gives payments providers opportunities to capture untapped potential and reach underserved populations... Margins for digital payments providers are already wafer thin and are likely to be eroded further by competitive intensity and declining fees. In many cases, payments are more a means to cross-sell other products than a profit center in their own right. Some services, such as peer-to-peer (P2P) payments, are usually offered to users for free in most markets. In Brazil, for instance, Pix is pushing margins down by offering P2P payments for free and person-to-merchant (P2M) payments at low cost.

The U.S. Treasury published a report on the Future of Money and Payments that reviews the current U.S. system of money and payments, including developments in instant payments and stablecoins. It describes design choices for a potential U.S. central bank digital currency (CBDC) and recommends that the Fed advance work on it, in case one is determined to be in the national interest. Among other things, the report also encourages use of instant payment systems to support a more competitive, efficient, and inclusive U.S. payment landscape, the establishment of a federal framework for payments regulation to protect users and the financial system, while supporting responsible innovations in payments, and prioritizing efforts to improve cross-border payments, both to enhance payment system efficiency and protect national security.

Crunchfish and Lipis Advisors pubished a guide to offline payments design, providing insights to how offline payments relate and can interoperate with online payment system. It provides a way of categorizing offline payment solutions by three design choices which provides the payment ecosystem with a better understanding of the nuances of offline payments: -Online Payment Rail: (i) distributed ledger technology (DLT) based or (ii) centralized account-based. (The paper incorrectly labels DLT-based as token-based (see the 20xx New York Fed article on this misnomer). -Offline Security Protocol: (i) native (layer-1) or (ii) non-native (layer-2) tokens security protocol, described in relation to the underlying online payment rail. -Offline Trusted Environment: (i) hardware-based or (ii) software-based.

"Financial intermediaries play an important role in consumer adoption and use of payment technology. Card schemes and card-issuing banks set rules for cashless payments between consumers and merchants. We document that these rules have a strong causal impact on the use of digital payment technology. We study an increase in the value limit for contactless cardholder verification ("tap-and-go" limit) that was introduced at the onset of the COVID-19 pandemic. Our analysis is based on anonymized, transaction-level data for a large sample of point-of-sale (POS) debit card payments between 2019 and 2021. We show that the increase in the "tap-and-go" limit caused a significant increase in the consumer use of contactless payments but only a minor increase in first-time adoption of this payment technology. Our results suggest that policy-makers are advised to consider the role of intermediaries and verification rules when evaluating payment innovations, such as instant payment systems or central bank digital currencies (CBDCs)."

The authors of a recent IMF working paper, based on a study of the declining use of cash for payments relative to payment cards and e-money in 24 of 25 countries studied, concluded that the main impact of the introduction of a retail central bank digital currency (CBDC) will be on the usage of cash substitutes. They assume that central banks will likely design their CBDCs to largely match user and merchant benefits associated cards use in terms of convenience, speed of payment, fraud control, and other desirable payment attributes, and then run through the additional incentives that may be required for their adoption and use. These might include zero fees to both users and merchants, and making payments immediately final and available in receivers' bank deposit accounts. However, card schemes may fight back by reducing interchange fees and providing merchants immediate access to card sale revenues and make up the revenue loss elsewhere. Also, card firms that own and supply fast payment services may choose to rely on these newer payment services going forward, providing zero-cost person-to-person mobile payments, as well as person-to-business point of sale transactions and business-to-business invoice payments, with fees paid for by the receiver.

The Swiss National Bank (SNB) published a paper that examines how payment choice affects consumer discretionary spending using a proprietary dataset that links a payment-methods survey, a payment-diary survey and a behavioral survey for a representative sample of 1,138 Swiss consumers. It finds that "present-biased" consumers spend more, the more often they use cashless payment instruments. (Present-based consumers are those that score high on indicators of impulsivity and procrastination.) For consumers with low levels of present bias, we find that spending is unaffected by payment instrument usage. This suggests that designers of instant payment services and central bank digital currency (CBDC) wallets consider offering prepaid payment cards or of mobile-payment applications that allow consumers to manage and restrict their liquidity in a convenient manner.

The Eurosystem has a mandate to promote the smooth functioning of the payment system from a holistic perspective. From the perspective of retail payments, the smooth functioning of the payment system means ensuring that, in their tangible interaction with the euro, people and businesses are able to make safe and efficient payments and thus their trust in the currency is maintained. To this end, the Eurosystem is responsible for issuing public money, currently in the form of cash, which may possibly be complemented by a digital version, i.e. a digital euro. In addition, the Eurosystem can act: (i) as a catalyst for change, promoting efficiency in the field of retail payments; (ii) as overseer, setting retail payment standards and rules and ensuring compliance; and (iii) as an operator, having the possibility to set up public infrastructures. The trends at work in the retail payments landscape have the potential to bring benefits to consumers and businesses alike. However, they also carry risk and will require the Eurosystem to take action in its different capacities. This article looks at the changing retail payments ecosystem, before turning to the Eurosystem's multi-faceted policy response and providing perspectives on the way ahead.

Payments Canada selected Mastercard's Vocalink as the clearing and settlement solution provider for the country's new Real-Time Rail (RTR). Operated by Payments Canada and regulated by the Bank of Canada, the RTR will allow Canadians to initiate payments and receive irrevocable funds in seconds, 24/7/365. Underpinned by the ISO 20022 data standard, the system will support payment information travelling with every payment and act as a platform for innovation, enabling the introduction of new and enhanced payment products and experiences. The RTR is expected to launch in 2022.

The Bangko Sentral ng Pilipinas (BSP)published its "2022 Status of Digital Payments" report, highlighting the significant growth of digital payments in the Philippines, now comprising 42% of all retail payments in 2022 (versus 14% rate in 2019) and 40% in terms of value (24%). Merchant payments and person-to-person (P2P) fund transfers are the main drivers of the greater digital payments adoption, representing 74% and 15% of total digital payment volumes, respectively. These payment use-cases are high-frequency, low-value transactions.  https://www.bsp.gov.ph/SitePages/MediaAndResearch/MediaDisp.aspx?ItemId=6776

"QR code payments lower payment costs for commercial customers, enable them to get their money faster, make reconciliation easier and provide a seamless payment experience for their customers. Financial institutions looking to offer innovative, high value payment methods to their commercial customers can test QR code payment use cases, solution providers and strategies today in a closed-loop environment. As RTP and FedNow gain traction in the U.S., financial institutions with QR code payment know-how can enhance their instant payments offering with QR codes to differentiate, and ultimately win new business."

FIS published its 2023 Global Payments Report that examines how consumers pay today both in-store and online across 40 global markets. In 2022, there were almost 70 real-time payment (RTP) schemes providing high-speed payment rails that helped drive account-to-account (A2A) payments to account for $525 billion in global e-commerce transaction value, versus $463 billion in 2021. A2A payments flow directly - and often instantly - from a consumer's bank account to a merchant's account, helping to drive down the cost of acceptance for merchants. The growth of A2A in the U.S. mirrors the global trend, with A2A accounting for 9% of e-commerce transaction value in 2022. This is projected to keep growing, fueled in part by consumer use cases arising from the 2023 launch of the Federal Reserve's FedNow payments network, and the existing RTP from The Clearing House and Zelle real-time payment networks

This commentary looks at the payments landscape through the lens of the Committee on Payments and Market Infrastructures (CPMI) 2019 Red Book statistics. It shows how consumers are increasingly shifting from physical to digital instruments, promoting efficient, faster and more convenient payments. However, cash, and in some jurisdictions, other paper-based payments such as cheques remain important payment instruments. In more than half of the CPMI jurisdictions, "cash is still king" and its circulation continues to grow. In the same time frame, more than half of the CPMI countries have experienced a switch from physical payment instruments to digital payments.

Using "unique end-to-end tracking reference" (UETR) data from Q2 this year, SWIFT demonstrates how its "global payments initiative" (gpi)payments are fast: 92% of cross-border payments are credited to the beneficiary's account within 24 hours and 40% within just 30 minutes. But for payments between mature markets without currency controls, compliance stops or legacy systems, performance is comparable to many domestic payment systems: for example, 72% of payments from the UK to the US arrive within 30 minutes and 95% within six hours. There are fewer intermediaries in a payments chain than expected and that the number of agents has little or no impact on transaction speed. Speed is largely driven by other factors, such as regulatory barriers, capital controls, legacy systems and time zones.

Payments Canada published its annual Canadian Payment Methods and Trends 2021 report, which analyzed 20 billion payment transactions made in 2020, totalling $9.4 trillion, and discusses trends that are transforming the Canadian payment landscape. It confirmed that the Covid-19 pandemic further accelerated migration to digital and contactless payments and growth in online transfers, with a decline in cash and cheques. Credit cards remain the most used payment method, followed by debit cards.

"Technological innovation is transforming payments. Domestic payments are increasingly convenient, instantaneous and available 24/7. However, shortcomings in access to payments and cross-border payments remain. Lack of access to payments is a problem in some emerging market and developing economies. Improving cross-border payments will require international coordination. Initiatives to improve cross-border payments would benefit from better data to quantify both the extent and the drivers of the problems."

This opinion piece suggests that the US Congress create a national "payments passport" by allowing money transmitters with at least 40 state licenses to obtain limited access to the payments system, provided they are subject to Federal Reserve regulatory standards and supervision tailored to payments services. State-based licensing and supervisory authority would remain in place, while the Federal Reserve would be empowered to ensure the safety, soundness, and integrity of its own payments system. This framework could also include tailored parent company oversight to protect safety and soundness and be limited to firms whose activities are predominantly financial in nature. And such payments companies would directly originate, clear, and settle payments, but lack access to broader Fed services. They would not be granted full banking powers, limiting the threat to community banks, while the preservation of state-based consumer protections would ease consumer advocates' concerns.

The Capgemini Research Institute published its 2023 World Payments Report. reveals non-cash transaction volumes will reach 1.3 trillion by 2023 globally. As consumers and businesses adopt new digital payment schemes, the report suggests this growth will accelerate to 2.3 trillion by 2027 growing at a rate of 15% annually. At a regional level, digital payments will grow by 19.8% across the Asia Pacific, 10.7% in Europe, and 6.5% in North America by 2027. According to the report, by 2027, new payment methods (instant payments, e-money, digital wallets, account-to-account, and QR code payments) will make up approximately 30% of total volume, with traditional non-cash payments (checks, direct debits, cards, and credit transfers) dropping to around 70% of overall non-cash transaction volumes.

The Financial Stability Board (FSB) published its report to the G20 on the framework for monitoring progress toward meeting the targets for the G20 Roadmap for Enhancing Cross-border Payments, to achieve cheaper, faster, more transparent, and more accessible payments. The framework includes key performance indicators defined across the 11 targets for the three market segments - wholesale, retail, and remittances. Notably, the definitions of the wholesale and retail market segments have been adjusted to more clearly separate the differing use cases and end-user experiences and better align the definitions with those most typically used by the payments industry and end-users. Wholesale transactions were defined as those between financial institutions, and retail transactions as those that were neither between financial institution end-users nor in the third market segment - remittances. Going forward, the wholesale market segment will include all payments with a value equal to or exceeding a specified threshold regardless of whether the end-users are financial institutions. The threshold will be set at a level that captures the use cases in this market segment, such as high-value corporate business-to-business. Relatedly, retail payments will be payments with a value less than the specified threshold, not including remittances.

How long do payments via different payment methods take? This question was analyzed in an interesting research by Deutsche Bundesbank (BuBa). The result: The quickest payments are smartphones/smartwatch payments (14 seconds), followed by contactless card payments (15.2 seconds), and cash payments (18.7 seconds).