I explore the meaning of an interoperable payment system and why interoperability is crucial for efficiency and competition. I review some alternative approaches to interoperability, including central bank digital currencies (CBDCs), hybrid CBDCs, and two-ledger upgrades of bank-based payment systems.

Interoperable Payment Systems and the Role of Central Bank Digital Currencies, May, 2020, in "Finance and Insurance Reloaded," Institut Louis Bachelier Annual Report, 2020: https://www.darrellduffie.com/uploads/policy/DuffiePaymentInteropMay2020...

Darrell Duffie is the Adams Distinguished Professor of Management and Professor of Finance at Stanford Graduate School of Business, and Professor (by courtesy) in the Department of Economics, Stanford University. He is a Fellow of the Econometric Society, a Research Fellow of the National Bureau of Economic Research, a Fellow of the American Finance Association, and a Fellow of the American Academy of Arts and Sciences. Duffie was the 2009 president of the American Finance Association. He chaired the Financial Stability Board's Market Participants Group on Reference Rate Reform. Duffie is a Project Advisor of The G30 Working Group on Digital Currencies, a member of the Systemic Risk Council, and a member of the Advisory Council of Stanford University's Future of Digital Currency Initiative.