The digital finance revolutions in India and Brazil
India and Brazil have emerged as two success stories in digital finance, with innovations that help address financial inclusion, identity verification, and the safe sharing of data. India’s Unified Payments Interface (UPI), launched in 2016, has improved the efficiency of account-based payment systems by addressing the core frictions of information exchange, authentication, and final settlement (Purnanandam 2025). Developed under a public-private partnership, UPI enables real-time, low-cost, and interoperable digital payments between any two entities, regardless of their bank or payment service provider. India overcame challenges around identity verification and financial inclusion by implementing a nationwide system of digital, biometric-based identification and by expanding access to bank accounts for large segments of the unbanked population. These developments, alongside digital infrastructure investments and regulatory support for private sector participation, allowed UPI to lower transaction costs and provide small businesses with digital transaction histories that improved access to credit.
The system’s interoperable design allows users to choose among competing apps, reinforcing network effects and encouraging innovation. Early adoption by banks in some areas led to persistent increases in digital payment usage. Moreover, UPI has enabled streamlined welfare disbursements, with nearly 60% of subsidy payments being delivered directly into beneficiary accounts by 2024. Overall, the UPI experience demonstrates the critical role of coordinated efforts across public and private sectors, along with a flexible and inclusive regulatory framework.
In Brazil, the Central Bank of Brazil has led a comprehensive innovation strategy, Agenda BC#, fostering tokenisation and integration to enable faster, more transparent, and programmable asset transfers (Araujo and da Silva Correa 2025). The agenda is built around four interlinked pillars: (1) Pix, an instant payment system launched in 2020, which also supports a ‘synthetic’ retail central bank digital currency (CBDC) model; (2) Open Finance, which promotes secure data sharing and competition; (3) Drex, Brazil’s central bank digital currency designed as a platform for a tokenised economy; and (4) the internationalisation of the Brazilian real, through regulatory modernisation and cross-border interoperability. Each component reinforces the others, creating a cohesive, digital financial ecosystem that enhances efficiency, security, innovation, and inclusivity. Together, these initiatives aim to create a user-centric financial system where services are accessed through intelligent aggregators, enhanced by AI and driven by user-controlled data.
Robust digital innovations require governance and institutional capacity
Developments in other parts of the world highlight the need for good governance and infrastructure to support digital finance. In sub-Saharan Africa, digital innovations are reshaping the payment landscape, facilitating financial inclusion, payment efficiency, lower remittance costs, and reduced informality (Ricci et al. 2025). Private mobile money has been particularly impactful, with account ownership far outstripping the growth of traditional bank accounts. While central bank digital currencies, fast payment systems, and crypto assets are debated (with Nigeria having already launched the eNaira), their broader adoption is held back by weak digital infrastructure, limited institutional capacity, low levels of financial and digital literacy, and the high costs of system deployment. Cross-border payments remain slow and costly, and fragile governance frameworks heighten concerns about consumer protection, data privacy, and financial integrity.
To address these challenges, Ricci et al. (2025) outline four policy priorities: (1) investment in infrastructure and skills; (2) supporting private innovation within secure and competitive regulatory frameworks that enable interoperability and reinforce governance; (3) positioning public digital tools to complement – rather than compete with – private solutions, based on assessments of market gaps and resource needs; and (4) fostering regional and international coordination to ensure interoperability and resilience. Ultimately, digital payment reforms must be anchored in sound macroeconomic policies that preserve monetary sovereignty and financial stability.
Competing models in advanced economies: The US versus the euro area
In advanced economies, digital innovation has been equally strong, with important questions centring around who issues new forms of digital money and how to balance privacy and stability concerns. In the US, the 2025 Executive Order on digital financial technology and the GENIUS Act represent a strategic shift towards private sector-driven innovation in blockchain-based financial systems (Lee 2025). The Executive Order rules out the development of a central bank digital currency while endorsing a technology-neutral approach and regulatory clarity for stablecoins. The GENIUS Act establishes a federal framework for fiat-backed payment stablecoins, mandating at-par redemption, backing primarily by US dollar cash and cash equivalents, and regulatory oversight. Regarding the more than 340 stablecoins in circulation – 97% dollar-denominated and dominated by Tether and Circle – concerns remain over reserve transparency, and redemption practices vary widely. Along with stablecoins, other financial instruments such as tokenised US Treasury funds and tokenised deposits form a spectrum, each balancing accessibility and return in different ways.
The growth of private (often foreign) service providers in retail payments carries significant risks: rising payment costs due to oligopolistic market power, reduced financial and monetary stability, loss of seignorage income, and geopolitical vulnerability. In light of these, Bindseil and Cipollone (2025) view central bank electronic cash (CBEC) as essential to preserving monetary sovereignty. CBEC helps counter emerging threats across five dimensions: it protects macro-financial stability by preventing dollarisation; it ensures access to payment systems without abuse of market power; it preserves seigniorage income and the financial independence of central banks; it reduces strategic dependencies on foreign actors; and it protects informational sovereignty by avoiding overreliance on foreign-owned platforms.
In contrast to the US, the euro area has focused on introducing a central bank digital currency – the digital euro –, which could help close the growing ‘privacy gap’ in digital payments (van Oordt 2025). Electronic payments generate detailed records that are monitored by payment service providers and subjected to regulatory oversight. These data are not only used for compliance but also for commercial purposes, and they can be leveraged not just to monitor but also to censor or exclude individuals. Van Oordt does not expect the currently proposed digital euro design, which includes both online and offline payment options, to reverse the erosion of privacy in retail payments. He stresses that privacy in payments is a public good and warns that failing to safeguard it in the digital age would squander a crucial opportunity to redesign the financial system in a way that upholds individual autonomy and democratic values.
Beyond privacy concerns, the digital euro should also preserve financial stability. The European Commission’s June 2023 legislative proposal tasks the European Central Bank (ECB) with developing instruments to limit the use of the digital euro as a store of value, including the introduction of individual holding limits (Assenmacher and Soons 2025). These limits are intended to balance three objectives: enabling convenient payments; ensuring smooth monetary policy transmission; and safeguarding financial stability. The ECB's methodology for calibrating these limits aims to make sure they are high enough for payment use but low enough to prevent significant bank deposit outflows that could destabilise funding structures. Research indicates that large deposit outflows would likely only arise if individual holding limits exceeded 5,000,ドル at which point banks would need to rely more heavily on central bank or market-based funding to manage liquidity pressures.
Conclusion
The digitization of payment systems is reshaping the global monetary architecture. While regions pursue distinct paths – balancing innovation, regulation, and public-private collaboration – some have used the transformation to leapfrog ahead. Diverging political priorities are increasingly reflected in the very trajectories of this system change.
References
Araujo, F and A da Silva Correa (2025), "The future financial system: Brazil’s experience", in D Niepelt (ed.), Frontiers of Digital Finance, CEPR Press.
Assenmacher, K and Oscar Soons (2025), "Bank deposit outflows and the digital euro holding limit", in D Niepelt (ed.), Frontiers of Digital Finance, CEPR Press.
Bindseil, U and P Cipollone (2025), "Central bank electronic cash and monetary sovereignty", in D Niepelt (ed.), Frontiers of Digital Finance, CEPR Press.
Lee, M J (2025), "The tokenised US dollar ecosystem", in D Niepelt (ed.), Frontiers of Digital Finance, CEPR Press.
Niepelt, D (ed.) (2025), Frontiers of Digital Finance, CEPR Press.
Purnanandam, A (2025), "Cashless payments in India: The UPI story", in D Niepelt (ed.), Frontiers of Digital Finance, CEPR Press.
Ricci, L A et al. (2025), "Strengthening digital payments in sub‐Saharan Africa: An overview", in D Niepelt (ed.), Frontiers of Digital Finance, CEPR Press.
van Oordt, M R C (2025), "Transforming the digital euro proposal from a threat into an opportunity for privacy", in D Niepelt (ed.), Frontiers of Digital Finance, CEPR Press.