While technological innovations typically increase wage inequality by favoring skilled workers, we show that instant payment systems instead reduce it. Using matched employer–employee administrative data, we study Brazil’s rollout of Pix. We implement a triple-difference design that exploits pre-treatment variation in mobile penetration across municipalities, the differential exposure of small versus large establishments, and the timing of Pix’s introduction. We find that wages in small establishments rise significantly relative to those in large establishments after Pix. These wage gains are concentrated in cash-intensive sectors (retail and services), with no effects in wholesale or manufacturing. Crucially, wage inequality declines, driven entirely by wage gains among workers in the lower half of the distribution. Our evidence points to increased small-business labor demand and firm entry, amplified by local labor market frictions. Overall, our findings show that technology’s impact on inequality hinges on the specific frictions it relaxes and the types of firms it disproportionately benefits.