The rise of instant payments and payment substitution across countries

Instant, or fast, payments are credit transfers that are completed and can be settled within seconds or minutes. They reduce payment delays, have low costs, reduce payment settlement risk, and are found here to have significantly substituted for cash, cards, and check plus direct debit payments across countries. We assess the results of policy decisions by regulators to promote instant payments across 12 advanced and emerging market economies that produce 42 percent of world GDP and account for 46 percent of the world's population. Our approach to determining the substitution among different payment instruments is new, but follows earlier work determining the substitution of capital for labour or factor substitution with the value of natural resource inputs in different industries. The goal of reducing payment delays and cost is similar to the earlier shift in many countries from paper-based to electronic payments. Policy makers in many countries are currently considering issuing retail CBDC. Instant payment's similarity to CBDC, however, suggests that if issued, the demand for CBDC may be less compelling. (171 words)