Instant Payment Systems and Competition for Deposits


This paper studies how financial technology reshapes competition among banks. I exploit quasi-random variation in the exposure to the introduction of Brazil’s Pix, an instant payment system, and show that instant payments increase deposit market competition – small bank deposits rise relative to large banks because Pix allows small banks to offer greater payment convenience to depositors. Since small banks become more competitive in the provision of payment services, they can reduce their deposit rates relative to large banks. Finally, I estimate a deposit demand model and find that depositors' welfare increases after Pix. These findings suggest that universally available payment systems can foster banking competition.

Presented at: American Finance Association, Annual Conference of the Banco Central do Brasil, Armenian Economic Association, Bank of Canada Payments and Securities Settlement Workshop, Conference on the Economics of CBDC, Economics of Payments Conference, Financial Intermediation Research Society (FIRS), NBER Summer Institute (Macro, Money, and Financial Frictions), Northern Finance Association, University of Western Australia Blockchain and Cryptocurrency Conference, Wharton-INSEAD Doctoral Consortium, Bank of Israel, Central Bank of Armenia, Federal Reserve Board of Governors

Mentioned by: American Banker, The Banker, The Economist

Sergey Sarkisyan
Sergey Sarkisyan
Ph.D. Candidate in Finance

My research interests include financial intermediation, monetary policy, and payment technologies