Mapping the Shadow Payment System

43 Pages Posted: 4 Oct 2019 Last revised: 4 Jan 2020

See all articles by Dan Awrey

Dan Awrey

Cornell Law School; European Corporate Governance Institute

Kristin van Zwieten

University of Oxford - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: October 8, 2019


Recent years have witnessed the emergence and rapid growth of a large, diverse, and constantly evolving shadow payment system. The shadow payment platforms (SPPs) that populate this system perform many of the same core payment functions as conventional deposit-taking banks: including custody, funds transfer, and liquidity. The crucial difference is that SPPs operate outside the perimeter of bank regulation, thereby depriving customers of the deposit guarantee schemes, lender of last resort facilities, special resolution regimes, and other legal protections typically enjoyed by bank depositors. This paper represents the first attempt to map the global shadow payment system and identify what mechanisms, if any, SPPs use to protect their customers. Examining the business models and customer contracts of over 100 SPPs, we find that it is often difficult to ascertain information essential to evaluating levels of customer protection and, where such information is available, that customers generally enjoy relatively limited structural, contractual, or other private legal protections. This puts enormous pressure on public regulatory frameworks to ensure a sufficient level of consumer protection. Regrettably, we also find that the applicable regulatory frameworks in several key jurisdictions often provide a level of protection that is far below that enjoyed by bank depositors. These findings suggest that, at least from a consumer protection perspective, SPPs are currently not an effective substitute for bank-based payment systems.

Keywords: Shadow Payment system, SPP, regulatory frameworks, bank deposits, mobile money, P2P, money remittance, cryptocurrency, exchange

JEL Classification: G20, G21, G23, K20, K22, K23

Suggested Citation

Awrey, Dan and van Zwieten, Kristin, Mapping the Shadow Payment System (October 8, 2019). SWIFT Institute Working Paper No. 2019-001, Cornell Legal Studies Research Paper No.19-44, Oxford Legal Studies Research Paper No. 55/2019, Available at SSRN: or

Dan Awrey (Contact Author)

Cornell Law School ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Kristin Van Zwieten

University of Oxford - Faculty of Law ( email )

St Cross Building
St Cross Road
Oxford, OX1 3UL
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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