The role of instant payments and central bank digital currencies in transforming merchant cash management

Abstract

The emergence of instant payments and central bank digital currencies (CBDCs) is poised to significantly reshape treasury management practices among merchants. These new digital payment models promise near real-time settlement, reduce counterparty risk, and could lower transaction costs, all of which have implications for merchants’ liquidity and working capital strategies. Nevertheless, their adoption also entails new complexities around technology integration, regulatory compliance, and the interplay between multiple payment rails (card, e-money, instant payments and CBDCs). This paper explores how instant payments and CBDCs could transform merchant cash management, focusing on cost efficiency, liquidity and operational risk. Drawing on examples from regions with live real-time payment systems, the discussion examines how faster settlement cycles can streamline forecasting and reconciliation processes. It also highlights new considerations for fraud prevention, cyber security and treasury infrastructure investment. Finally, potential opportunities around programmable money in the case of CBDCs — such as automated micropayments and smart contractbased transactions — are discussed, detailing how these capabilities could enhance treasury operations. The paper concludes by outlining strategic steps for merchants, including close collaboration with financial institutions and payment service providers, agile technology adoption, and a robust regulatory compliance framework.