TODAY, DIGITAL TECHNOLOGIES PROVIDE THE ON-RAMP FOR MANY PEOPLE in emerging markets to access and use financial services. Digital payments provide safe and efficient ways to send money home, receive or repay a loan on time, or buy goods from a merchant. M-PESA in Kenya, bKash in Bangladesh, and Movii in Colombia are just a few examples of the bank and non-bank products offering digital payments in emerging markets.

However, many of the payment services available to low-income customers have evolved as closed-loop systems, meaning they are not interoperable with the services of other providers. Systems that are interoperable improve customer value by allowing users to transact beyond their own network. They allow customers to send money to a friend using a different service, pay at a merchant acquired by another provider, or withdraw funds from an agent on a different network. In the absence of interoperability, customers often develop inconvenient and costly workarounds to make their transactions.

Interoperability also encourages competition by removing barriers to market entry for smaller providers. It may create economies of scale by reducing the need for individual providers to replicate distribution networks where financial access points already exist.

Instant payment systems—also known as fast, immediate, or rapid payment systems— facilitate the types of small-dollar, mobile payments most frequently used by low-income customers. Instant payment systems offer continuous, real-time availability, allowing for transactions between providers to be completed within seconds at any time of the day or night. Successful instant payment systems are characterized by clear oversight, effective scheme management, reliable switch operation, and timely settlement. Where these activities are well managed, they help to balance incentives and drive transactions at scale. While a central bank almost always performs payment system oversight, a variety of institutions can fill the other roles.

Cook, William, Dylan Lennox, and Souraya Sbeih. 2021. “Building Faster Better: A Guide to Inclusive Instant Payment Systems.” Technical Guide. Washington, D.C.: CGAP.