Instant Payment Systems and Competition for Deposits

Abstract

How do instant payment technologies impact financial intermediation? I use municipality-level data on the development of Pix in Brazil and combine it with branch-level banking data to provide evidence that instant payments positively impact deposit market competition – Pix usage increases checking, saving, and time deposits of small banks relative to large banks. I further exploit municipality-level COVID-19 restrictions to identify a persistent effect of Pix on local deposit market concentration over seven months after the launch, and a positive impact on bank deposits, resulting in more lending and lower loan rates. The findings suggest that instant payment systems can promote banking competition with positive consequences for deposits and loans.

Presented at: Wharton-INSEAD Doctoral Consortium, University of Western Australia Blockchain and Cryptocurrency Conference, Financial Intermediation Research Society (scheduled)

Media mentions: The Banker

Sergey Sarkisyan

Ph.D. Candidate in Finance

My research interests include financial intermediation, debt markets, and monetary policy