International Monetary Fund fintech note sets out how CBDC design could shape competition in retail payments

The International Monetary Fund published a Fintech Note analysing how a retail central bank digital currency (CBDC) could affect competition in domestic retail payments and providing practical guidance for policymakers. It frames CBDC as both a new payment instrument for end users and a new platform infrastructure for intermediaries, with competitive effects driven by the existing payments landscape, the regulatory context, and CBDC design choices. The note identifies four channels through which CBDC could influence competition: pricing discipline, service quality improvements, increased contestability via easier entry and lower reliance on legacy rails, and broader financial access. It finds the largest potential competitive impact in concentrated, lightly regulated markets dominated by profit-maximising platforms, while effects are likely to be more muted where well-adopted public fast payment systems already provide a low-cost alternative, and more oriented toward enabling digitalisation and inclusion in cash-reliant economies. Key design levers highlighted include intermediary participation rules and interoperability standards, fee structures (including constraints such as cost-recovery or zero-fee mandates), holding and transaction limits, remuneration, legal tender and mandatory acceptance, and rules around bundling and programmability, alongside cautions about fragmentation with existing public infrastructures and the risk of crowding out private alternatives if CBDC is priced too aggressively.