BIS Paper 151: Central Bank Digital Currencies and Fast Payment Systems — Rivals or Partners?

Understanding CBDCs and Fast Payment Systems in 2024

The Bank for International Settlements (BIS) Paper 151, published in December 2024 in collaboration with the World Bank, tackles one of the most consequential questions in modern monetary policy: are central bank digital currencies and fast payment systems rivals competing for the same space, or partners that can strengthen each other? Based on in-depth interviews with central bank staff in 14 jurisdictions conducted between December 2022 and February 2023, the paper provides the most comprehensive cross-jurisdictional analysis of this question to date.

A retail CBDC is defined as a digital liability of the central bank denominated in the national currency, designed for everyday use by households and firms. A fast payment system (FPS) encompasses the infrastructure, participating payment service providers, end-user-facing services, and underlying rules governing the processing and delivery of instant payments in commercial bank money or e-money. Both represent what the BIS calls digital public infrastructures (DPIs)—foundational systems that can reshape how societies transact, save, and access financial services.

The distinction matters enormously for policymakers. The 14 jurisdictions studied span four continents—including Brazil, Nigeria, India, the European Union, and The Bahamas—each with different levels of financial development, payment system maturity, and inclusion challenges. For organizations navigating this evolving landscape, Libertify’s interactive library offers accessible analyses of key policy documents shaping digital finance.

Key Similarities Between Retail CBDCs and Fast Payment Systems

The BIS research reveals that CBDCs and fast payment systems share more common ground than many policymakers initially assume. Both allow instant, typically low-cost transfers for end users. Both can be built on central-bank-operated infrastructure, and both allow important roles for private payment service providers in the ecosystem. This shared foundation explains why the question of rivalry versus partnership is so nuanced.

Both systems can support alias registries that allow users to send payments using phone numbers or email addresses rather than account numbers. Both can enable non-bank participation, expanding the ecosystem beyond traditional financial institutions. Both generally rely on central bank money for settlement of inter-PSP obligations, and both need integration with existing financial market infrastructures including RTGS systems and other retail payment platforms.

Perhaps most importantly, both systems can support a range of overlay services that add value beyond basic payments—including request-to-pay functionality, recurring payment scheduling, and integration with government benefit distribution systems. This overlap creates both opportunities for synergy and risks of duplication that central banks must carefully evaluate.

Critical Differences That Shape CBDC Policy Decisions

Despite their similarities, the differences between CBDCs and FPS carry profound implications for monetary policy, financial stability, and the role of central banks. The most fundamental difference is the nature of the claim: CBDC balances represent a direct claim on the central bank (public money), while FPS transfers move commercial bank money or e-money (private money). This distinction means CBDC balances carry no bankruptcy risk, while FPS balances depend entirely on the financial health of the holding institution.

Technical architectures also diverge significantly. Fast payment systems increasingly adopt ISO 20022 messaging standards, while live retail CBDC systems mostly use proprietary standards. Many FPS use deferred net settlement models, while CBDCs typically employ real-time gross settlement—eliminating counterparty credit risk but requiring different liquidity management approaches.

The central bank’s role differs markedly between the two systems. In a CBDC arrangement, the central bank is always the issuer and typically the operator—a significantly more expansive role than in most FPS configurations, where ownership can be public (like Brazil’s Pix, operated entirely by the central bank), private (like the RTP network in the United States), or a public-private partnership (like Nigeria’s NIBSS). This expanded role brings both opportunities for direct policy implementation and risks including potential conflicts of interest when the central bank serves as both operator and overseer.

The disintermediation risk remains the most cited concern among the central banks surveyed. If consumers move significant deposits from commercial banks into CBDC holdings, it could undermine bank lending capacity and disrupt monetary policy transmission. Most central banks are exploring holding limits and tiered remuneration structures to mitigate this risk, though the optimal design remains an active area of research.

Global CBDC Adoption: Three Live Implementations and Lessons Learned

As of September 2024, only three central banks have launched a live retail CBDC: The Bahamas, Jamaica, and Nigeria. Each offers distinct lessons for the broader central banking community. The Sand Dollar in The Bahamas achieved approximately 100,000 wallets—representing roughly 25% of the adult population—within three years of its October 2020 launch, processing approximately 200,000 transactions per month by March 2023.

Nigeria’s eNaira, launched in October 2021, reached approximately 900,000 wallets within its first year—but this represents only 0.5% of the Nigerian population, a significantly lower penetration rate than The Bahamas despite the larger absolute numbers. Nigeria holds the unique distinction of being the only jurisdiction that has implemented both an FPS (NIBSS Instant Payment) and a live retail CBDC, providing invaluable real-world data on coexistence.

The eNaira implementation demonstrates that CBDC-FPS interoperability is achievable: the two systems are connected via API through the national central switch, allowing seamless transfers between them. The eNaira also supports USSD technology for feature phone users, specifically targeting low-income, cash-dependent populations that may lack smartphones or reliable internet access.

Jamaica’s JAM-DEX completes the trio of live retail CBDCs, though the BIS paper notes it was a resource-consuming project requiring legal, financial, and technological expertise that stretched institutional capacity. Meanwhile, about a quarter of all central banks were piloting a retail CBDC in 2023, indicating significant interest even as adoption remains limited.

Fast Payment System Success Stories: Pix, UPI, and PromptPay

In contrast to the modest CBDC adoption figures, fast payment systems have achieved remarkable scale across multiple jurisdictions. Brazil’s Pix stands as perhaps the most dramatic success story in digital payment history. Launched in November 2020 and entirely owned and operated by the Banco Central do Brasil (BCB), Pix onboarded more than 150 million individual and business users in its first year and is now used by over 90% of Brazilian adults.

The BCB’s approach to Pix offers a masterclass in prescriptive central bank leadership. The bank established a single brand with precise scheme rules, mandated participation of large financial institutions, enforced transparent pricing, and created the “Pix Forum” with approximately 200 participating institutions to ensure stakeholder alignment. Social media campaigns and influencer partnerships drove consumer awareness, while Law 12,865 of 2013 provided the regulatory foundation for payment modernization.

India’s Unified Payments Interface (UPI) represents another landmark achievement, with nearly 600 banks live as of March 2024 and more than 13 billion transactions in a single peak month. At least 25% of Indian adults use UPI annually. Thailand’s PromptPay registered approximately 63 million end users in early 2022, representing more than 85% of the population. Costa Rica’s SINPE Móvil reaches over 70% of adults.

The success of these systems has directly influenced CBDC strategies. Brazil, for instance, is now exploring Drex—a wholesale CBDC rather than retail—precisely because Pix has already addressed many of the financial inclusion goals that retail CBDCs are designed to achieve. This pragmatic approach of building on existing FPS success rather than duplicating it with a CBDC exemplifies the complementary relationship the BIS paper advocates. Organizations seeking to understand how these payment ecosystems operate can explore detailed analyses in Libertify’s interactive library.

Financial Inclusion Through Digital Payment Infrastructure

Both CBDCs and fast payment systems are frequently positioned as tools for financial inclusion, but the BIS research delivers a sobering message: neither is a silver bullet. Successful financial inclusion requires robust regulatory frameworks, financial education programs, merchant acceptance networks, and complementary public policies that extend far beyond the payment system itself.

The paper identifies several ways digital payment infrastructure can expand access. Simplified KYC requirements for low-value accounts can reduce barriers to entry for unbanked populations. Offline payment capabilities—considered technologically easier to achieve with retail CBDCs than FPS due to the tokenized nature of CBDC claims—can reach populations in areas with limited connectivity. Nigeria’s exploration of offline eNaira capabilities using feature phones and Ghana’s investigation of wearable devices for offline CBDC payments demonstrate the diverse approaches being tested.

However, the central banks interviewed consistently emphasized that technology alone cannot solve inclusion challenges rooted in poverty, geography, digital literacy gaps, and institutional trust deficits. The most successful implementations—like Pix and UPI—combined technical innovation with active stakeholder engagement, consumer education, and regulatory mandates that ensured both supply-side participation and demand-side adoption. For jurisdictions with limited resources, the BIS suggests that building an FPS first represents a more proven and pragmatic path to inclusion than leaping directly to a retail CBDC.

Cross-Border CBDC Payments and Interoperability Challenges

Cross-border payments represent one of the most promising applications for both CBDCs and FPS, but the BIS paper finds that fast payment systems appear more promising in the short term. The proliferation of FPS globally has created opportunities for interlinking that are already being realized. The PayNow-PromptPay link between Singapore and Thailand and the PayNow-UPI link between Singapore and India demonstrate working cross-border FPS connections.

The BIS Innovation Hub’s Project Nexus represents the most ambitious effort to create a hub connecting domestic fast payment systems for cross-border transactions. By standardizing the interface between national FPS, Project Nexus aims to reduce the cost, speed, and complexity barriers that have historically plagued international remittances and trade payments.

CBDC cross-border interoperability, while theoretically powerful, faces greater near-term challenges. Different jurisdictions are building CBDCs with varying technical architectures, messaging standards, and governance frameworks. The Bahamas central bank noted that interlinking FPS using ISO 20022 standards may be easier than achieving cross-border CBDC interoperability. India emphasized that cross-border interoperability should be designed not only with other CBDC systems but also with traditional payment systems—a pragmatic recognition that the global payment landscape will remain heterogeneous for years to come.

Compatibility and interoperability emerge as critical design principles regardless of whether a jurisdiction chooses CBDC, FPS, or both. Standardization of aliases, proxy identifiers, QR codes, messaging standards, and open APIs can facilitate integration across systems and borders. The European Central Bank’s approach of considering the reuse of existing fast payment technical standards for the digital euro illustrates how building on proven foundations can accelerate development.

CBDC Programmability and Offline Payment Capabilities

Programmability represents one of the most distinctive advantages that CBDCs can offer over traditional fast payment systems. Because a CBDC system can unify the balance ledger and program logic within a single platform, it enables conditional payments, automated compliance, and smart contract functionality that would require coordinating two separate databases in an FPS environment. This capability opens possibilities for targeted government disbursements, automated tax collection, and composable financial products that current payment systems cannot efficiently support.

Tokenization—the ability to represent assets or claims as programmable digital tokens—is another area where CBDC systems have a natural advantage. While tokenization is possible in FPS environments, it requires additional infrastructure layers that add complexity and potential points of failure. Several central banks in the study are exploring how tokenized CBDCs could enable new financial products including fractional ownership, automated collateral management, and real-time securities settlement.

Offline payment capabilities present a nuanced picture. The BIS paper considers offline transactions technologically easier to achieve with retail CBDCs than with FPS, because tokenized claims can be transferred between devices without requiring real-time connection to a central ledger. India’s UPI Lite X has attempted offline FPS payments, demonstrating that the challenge is not insurmountable for fast payment systems, but the CBDC architecture is more naturally suited to this use case.

The privacy dimension of CBDC design remains contentious. Full anonymity would attract illicit activity and undermine AML/CFT compliance, and the BIS notes that most central banks are discarding full anonymity as an option. The challenge lies in designing a system that provides adequate privacy protection for legitimate users while maintaining sufficient transparency for regulatory compliance—a balance that continues to evolve as technology and policy frameworks mature. Insights from Libertify’s interactive research library explore how central banks are approaching this design challenge.

Strategic Framework for Central Banks Evaluating Digital Payment Systems

The BIS Paper 151 concludes with a strategic framework organized around four pillars that central banks should consider when evaluating their digital payment strategy. First, on complementarity: for jurisdictions without well-functioning payment ecosystems and with limited resources, building an FPS first makes practical sense as a proven solution. For those with an existing FPS but persistent inclusion gaps, the question becomes whether to upgrade the FPS or issue a CBDC—a decision that depends on whether the gaps are addressable through FPS enhancements or require the unique properties of central bank money.

Second, on success factors: the paper emphatically warns against implementing either system due to hype or fear of missing out. Clear objectives grounded in real market needs and resource availability must drive decisions. Early stakeholder involvement—including political and legislative buy-in for CBDCs—is essential. Effective end-user communication through surveys, focus groups, and public consultations builds the trust necessary for adoption, particularly for the novel concept of a central bank digital currency.

Third, on design choices: operational resilience and cybersecurity are described as sine qua non requirements for both systems, as either could become critical national infrastructure if widely adopted. Future-proof design should accommodate evolving use cases including online and offline payments, push and pull transactions, simplified KYC, and cross-border payments. Pricing must balance affordability for end users with sufficient remuneration for payment service providers to incentivize innovation.

Fourth, on the role of the central bank: institutions must work within their mandates while recognizing the expanded responsibilities that come with operating a retail CBDC. Efficient governance frameworks are needed to manage potential conflicts of interest, ensure operational independence, and maintain public trust. For privately operated FPS, the central bank can serve as an independent board member and system participant—providing oversight without assuming full operational responsibility.

The overarching message is clear: the choice between CBDC, FPS, or both is highly contextual. There is no universal answer, and central banks must resist the temptation to follow global trends without first conducting thorough analysis of their domestic payment landscape, institutional capacity, and policy objectives. The jurisdictions that succeed will be those that approach digital payment infrastructure as a long-term strategic investment rather than a reaction to external pressure.