Conference Agenda

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