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FINTECH NOTE
Estimating the Impact of Digital Money on Cross-Border Flows Scenario Analysis Covering the Intensive Margin
Prepared by Eugenio Cerutti, Melih Firat, and Hector Perez-Saiz
February 2025
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©2025 International Monetary Fund
Estimating the Impact of Digital Money on Cross-Border Flows: Scenario Analysis Covering the Intensive Margin
Note 2025/002
Prepared by Eugenio Cerutti, Melih Firat, and Hector Perez-Saiz*
Cataloging-in-Publication Data IMF Library
Names: Cerutti, Eugenio, author. | Firat, Melih, author. | Perez-Saiz, Hector, author. | International Monetary Fund, publisher.
Title: Estimating the impact of digital money on cross-border flows: scenario analysis covering the intensive margin / Eugenio Cerutti, Melih Firat, and Hector Perez-Saiz.
Other titles: Scenario analysis covering the intensive margin. | Fintech notes (International Monetary Fund).
Description: Washington, DC : International Monetary Fund, 2025. | Feb. 2025. | Includes bibliographical references.
Identifiers: ISBN:
9798229000611 (paper)
9798229000703 (ePub)
9798229000758 (WebPDF)
Subjects: LCSH: Digital currency. | Banks and banking—International.
Classification: LCC HG1710.C4 2025
DISCLAIMER: Fintech Notes offer practical advice from IMF staff members to policymakers on important issues. The views expressed in Fintech Notes are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
RECOMMENDED CITATION: Cerutti, Eugenio, Melih Firat, and Hector Perez-Saiz. 2025. “Estimating the Impact of Digital Money on Cross-Border Flows: Scenario Analysis Covering the Intensive Margin.” IMF Fintech Note 2025/002, International Monetary Fund, Washington, DC.
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*This note has benefited from discussions at the G20 IFA (Brazil) meeting, IMF Fintech Brownbag Seminar, the Bank of England, and internal IMF seminars. The authors would like to thank Marianne Bechara, Pelin Berkmen, Gabriela Conde, Adrian Dorel, Julia Faltermeier, Andres Fernandez, Russell Green, Tommaso Mancini Griffoli, Dong He, Kenneth Kang, Joe Kogan, Yaroslav Hul, Nghi Luu, Marcello Miccoli, Maria Olivia, Sole Martinez-Peria, Svitlana Maslova, Junghwan Mok, Kieran Murphy, Nasir Rao, Andre. Reslow, Marco Reuter, Nadine Schwarz, Indulekha Thomas, Anita Tuladhar, Tomohiro Tsuruga, Dmitry Vasilyev, Torsten Wezel, Rui Xu, and the participants in seminars at the Bank of England, G20 IFA working Group Meeting, and the IMF.
Contents
Summary
Introduction
The Global Market for Cross-Border Payments
Estimating the Effect of Central Bank Digital Currencies on Transaction Costs and Volumes at the Intensive Margin
Corridor-by-Corridor Calculation for Remittances
Conclusion
Annex 1. Data Sources
Annex 2. Econometric Specifications
References
Boxes
Box 1. Financial Literature and Elasticities
Figures
Figure 1. Cross-Border Payments: Wholesale and Retail Markets
Figure 2. Cross-Border Payments: Retail Markets
Figure 3. Illustration of the Cross-Border Payments Markets
Figure 4. Payment Costs by Size and C2C Payment Costs and Corridor
Figure 5. Distribution of Costs in Cross-Border Payments
Figure 6. Heterogeneous Price Elasticities
Figure 7. Effects of CBDC: Cross-Country Variation for Remittances
Tables
Table 1. Transaction Costs across Different Markets
Table 2. The G20 Roadmap: Targets
Table 3. Scenario Analysis: 60 Percent Reduction in Transaction Costs
Table 4. Scenario Analysis: Increase in Transaction Volumes
Table 5. Importance of Cost of Remittances across Countries
Table 6. Effects of CBDC: Heterogeneous Effects for Remittances
Summary
Digital money and digital payments innovations have the potential for improving cross-border payments by reducing costs, enhancing speed, and improving transparency. This note performs an empirical analysis of the potential impact of digital money on the volume and transaction costs of cross-border payments, with a focus on the short-term intensive margin. The market of cross-border payments is very large, with retail transactions having a low share of the total but the highest transaction costs, particularly for remittances. Our illustrative scenarios assume an estimated 60 percent reduction in transaction costs and short-term elasticities to changes in costs estimated from remittances data. The results show two outcomes. First, the cross-border volume increases could be sizable for countries that are large remittance recipients and face expensive transaction costs. Second, even with a large drop in transaction costs, the short-term rise in global cross-border transaction volumes could be limited as a result of the low transaction costs of the wholesale segment. Moving outside the short-term intensive margin, the impact could potentially be much larger as digital currencies and other digital payments innovations—together with tokenization of assets on programmable platforms—could move the financial system into a transformative new era by fostering financial development and promoting further inclusion across borders.