We argue it is efficient/desirable for central banks to operate retail Instant Payments (IP) schemes and infrastructure, considering that (i) payment service providers (PSPs) face a problem of collective action, which limits their capacity to deliver a cheap, fast, open-architecture and interoperable IP scheme; and (ii) this problem may be overcome by a central bank (economically neutral actor) with a dual role of regulator and operator of IP schemes, especially by mandating participation of large PSPs and ensuring that the low cost of infrastructure is passed on to consumers. We corroborate with data from Brazil’s Pix and India’s UPI, where the efficiencies of central bank-led IP schemes also led to social gains through financial inclusion.
