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Catching The Fast Payments Trend: Optimal Designs And Leadership Strategies Of Retail Payment And Settlement Systems, Zhiling Guo, Dan Ma
Catching The Fast Payments Trend: Optimal Designs And Leadership Strategies Of Retail Payment And Settlement Systems, Zhiling Guo, Dan Ma
Research Collection School Of Computing and Information Systems
Recent financial technologies have enabled fast payments and are reshaping retail payment and settlement systems globally. We developed an analytical model to study the optimal design of a new retail payment system in terms of settlement speed and system capability under both bank and fintech firm heterogeneous participation incentives. We found that three types of payment systems emerge as equilibrium outcomes: batch retail (BR), expedited retail (ER), and real-time retail (RR) payment systems. Although the base value of the payment service positively affects both settlement speed and system capability, the expected liquidity cost negatively impacts settlement speed, and total transaction …
How To Enable Future Faster Payments? An Evaluation Of A Hybrid Payments Settlement Mechanism, Zhiling Guo, Yuanzhi Huang
How To Enable Future Faster Payments? An Evaluation Of A Hybrid Payments Settlement Mechanism, Zhiling Guo, Yuanzhi Huang
Research Collection School Of Computing and Information Systems
In the era of Fintech innovation and e-commerce, faster settlement of massive retail transactions is crucial for business growth and financial system stability. However, speeding up payments settlement can create periodic liquidity shortfalls to banks which would incur high cost of funds in the settlement process. We propose a new hybrid settlement mechanism design that integrates features of real-time gross settlement, deferred net settlement, and central queue management structure. The hybrid mechanism is managed by an intermediary and is particularly suitable to settle large volume of small-value retail payments. We evaluate the mechanism using computer experiments and simulation. We find …