Domestic fast payment systems lower international remittance fees
Domestic fast payment systems reduce the cost of cross-border remittances by squeezing foreign exchange margins and intensifying provider competition. A new Banca d'Italia study shows that adoption lowers transfer fees even without direct international system links.
FX margins shrink as competition intensifies
The paper applies a staggered econometric framework across granular country, firm, and instrument levels to measure how Fast Payment Systems (FPS) affect cross-border transfers.
Although authorities design FPS for domestic retail payments, remittance costs to implementing countries drop notably after rollout.
This reduction is driven by narrower foreign exchange margins, a cost component often hidden from consumers.
The cost decline is most pronounced for cash-collected transfers, which are traditionally more expensive than transfers to mobile wallets.
An instrumental variable approach confirms that increased competition among remittance service providers is the core transmission mechanism.
Spillover benefits without bilateral links
Published in Banca d'Italia's series on markets, infrastructures, and payment systems, the research highlights that domestic modernizations generate positive cross-border spillovers.
Countries do not need pre-existing bilateral technical linkages between domestic platforms to achieve cheaper transfers.
Instead, domestic rail efficiencies exert structural pricing pressure across the entire value chain.
The authors conclude that multilateral interlinking of fast payment rails across jurisdictions could multiply these savings.
Domestic rails deliver where diplomacy lagged
The study confirms that domestic payment contestability effectively curbs opaque FX markups in remittances.
However, indirect spillovers cannot substitute for integrated multilateral settlement infrastructure.
Direct bilateral or regional interlinking remains imperative to eliminate remaining friction.