Person-to-business Instant payments: could they work in Colombia?

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La serie Borradores de Economía es una publicación de la Subgerencia de Estudios Económicos del Banco de la República. Los trabajos son de carácter provisional, las opiniones y posibles errores son responsabilidad exclusiva del autor y sus contenidos no comprometen al Banco de la República ni a su Junta Directiva.

Autor o Editor
Arango-Arango, Carlos Alberto
Restrepo-Bernal, Manuela
Ramírez Pineda, Ana Carolina

The series Borradores de Economía (Working Papers on Economics) contributes to the dissemination and promotion of the work by researchers from the institution. On multiple occasions, these works have been the result of collaborative work with individuals from other national or international institutions. This series is indexed at Research Papers in Economics (RePEc). The opinions contained in this document are the sole responsibility of the author and do not commit Banco de la República or its Board of Directors.

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Abstract

More than 60 countries in the world have already implemented instant payment systems (IPS). However, in many cases they have been operational mainly for person-to-person transactions. This study looks at the challenges IPS may face in developing economies like Colombia as they  advance further into the P2B transactions space. Using a survey on Colombian merchants (IV-2020), the study explores the factors associated with merchants´ propensity to adopt instant payments and those associated with the adoption of current electronic payment alternatives. It shows that IPS will  need to have a broad strategy to penetrate the P2B space, as they will have to compete with the low marginal costs and immediacy that cash already offers and the high levels of informality in the commerce sector, especially for micro businesses. Furthermore, IPS will have to meet the high expectations merchants have about instant payments enabling access to other financial services, enhancing their competitiveness, and increasing their bottom line. Key words: instant payments, faster payments, mobile payments, cash and electronic payments, merchants, retail payments, cards, bank transfers.