Supporting Digital Payments Adoption

Interoperability has long been a primary aim for payment systems due to their often isolated nature and parallel operations. According to data from the International Monetary Fund (IMF), an interoperable ecosystem can significantly enhance efficiency, promote digital payments adoption, reduce transaction costs, and expand credit access.

Contrast with Traditional Fintech Solutions

Interoperability has historically posed a challenge for payment systems in many countries, including the United States. Different payment rails operate on separate systems, leading to inconsistencies when sending or receiving payments. For instance, in the U.S., a company might be set up for FedNow services while another defaults to ACH.

The IMF study compared transactions through India’s Unified Payments Interface (UPI) with data from an unnamed major fintech firm operating over a closed network where both parties must use the same wallet app. The analysis found that after experiencing both systems, users increasingly favored UPI, especially for cross-app transactions.

Benefits of Interoperability

Interoperability drives digital payments adoption by offering users flexibility and choice among various payment apps. The IMF encourages countries aiming to reduce cash reliance to prioritize interoperable systems, citing evidence that regions with increased interoperability saw significant growth in digital payment adoptions.

By allowing access to multiple payment methods through different apps, interoperability lowers barriers to entry and fosters a more competitive payments ecosystem. This competition incentivizes existing providers to improve their services to retain users.