IMF Working Papers

Integrating Fragmented Networks: The Value of Interoperability in Money and Payments

By Alexander Copestake, Divya Kirti, Maria Soledad Martinez Peria, Yao Zeng

June 27, 2025

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Format: Chicago

Alexander Copestake, Divya Kirti, Maria Soledad Martinez Peria, and Yao Zeng. "Integrating Fragmented Networks: The Value of Interoperability in Money and Payments", IMF Working Papers 2025, 126 (2025), accessed June 28, 2025, https://doi.org/10.5089/9798229013857.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Payments technologies pose an economic dilemma: network effects can lead to a small number of dominant platforms, but efforts to increase choice can risk market fragmentation. We examine whether interoperability can help resolve this tension, using data from India’s Unified Payments Interface—the world’s largest fast payment system by volume—as well as from a major pre-existing fintech firm. When the two networks became interoperable, overall usage of digital payments rose. Consistent with a model of payment choice that we propose, this increase was driven by regions where digital payments were more fragmented across platforms ex ante. Our model implies that the unification of networks increased total usage of digital payments by more than 50% in the year after integration.

Subject: Digital financial services, Technology

Keywords: Digital financial services, FinTech, Interoperability, Networks, Payments, UPI

Publication Details

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