Interoperable Payment Systems

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In this image:A photo of a mobile money agent in Mwanza, Tanzania. © 2022 IPA Tanzania / Kyu Khin Gar
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Interoperability refers to the ability of users to send money to friends, family, and businesses without having to worry about each party having accounts at different banks. Interoperability supports financial inclusion because it increases the usability of digital financial services, enabling consumers to replace cash with formal channels like mobile money. In the absence of interoperability, consumers remain limited in their ability to transact with people in their social networks, merchants can not easily transact with suppliers, and the reach of financial institutions to unbanked individuals remains limited.

While interoperable payments systems are being implemented in many countries, several questions remain unanswered. These include, but are not limited to, optimal pricing arrangements within interoperable payments systems, strategies of onboarding merchants onto a payments switch, methods of payments acceptance at merchant locations (e.g. National QR standard, Dynamic QR arrangements) and favorable switch governance/management models. IPA’s Interoperable Payments Systems (IPS) research initiative is a $3.5 million funding facility which will support the development of research on interoperability in emerging markets over the course of three years. The IPS research initiative will explore questions around design and impact of these complex systems. This will include evaluating policies targeted towards increasing the uptake and usage of IPS, understanding the impact of IPS at the individual, household, and merchant level, and quantifying the impact of these payment systems on the overall economy of a country.

The initiative will partner with academic researchers as well as in-market partners such as central banks, commercial banks, mobile money operators, and FinTechs. In order to address knowledge gaps on interoperability, IPS will develop a portfolio of research projects in Asia and Sub-Saharan Africa using a combination of research methods such as demand-side surveys, administrative data analysis, A/B testing, and randomized evaluations.

Learn more about IPA's Interoperable Payments Systems (IPS) research initiative in this blog post and white paper.