Economics of Payments XII Conference, October 27, 2023 | Summary and Q&A

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October 27, 2023
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Federal Reserve
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Economics of Payments XII Conference, October 27, 2023

TL;DR

The introduction of the instant payment system (PXS) in Brazil led to a redistribution of deposits from large banks to small banks, resulting in lower market concentration and increased consumer welfare.

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Questions & Answers

Q: How did the adoption of PXS in Brazil affect depositors' preferences for small banks over large banks?

The adoption of PXS in Brazil led to a significant increase in deposits at small banks relative to large banks. Depositors were attracted to small banks due to the convenience and benefits offered by PXS, such as free transfers between accounts and lower transaction fees.

Q: Did the introduction of PXS in Brazil have a particularly significant impact on unbanked or underbanked individuals?

The paper does not specifically address the impact of PXS on unbanked or underbanked individuals. However, it can be inferred that the increased adoption of PXS likely improved financial inclusion by providing easier access to banking services and digital payment options.

Q: How did the cost of opening a bank account and switching banks impact consumers' decision-making in adopting PXS?

The paper does not explicitly discuss the cost of opening a bank account or switching banks. However, it does mention that PXS made transfers and payments more convenient relative to cash, potentially reducing switching costs for consumers. Further research could explore the specific costs and challenges associated with opening accounts and switching banks in the context of PXS adoption.

Summary & Key Takeaways

  • The launch of PXS in Brazil in November 2020 allowed for fast and convenient retail payments, leading to increased adoption by both large and small banks.

  • The increased adoption of PXS resulted in a significant decrease in deposit market concentration, with deposits shifting from large banks to small banks.

  • Small banks were able to reduce their deposit rates and compete more effectively with large banks due to the convenience and benefits provided by PXS.

  • Overall, the introduction of PXS led to increased financial inclusion, improved convenience for consumers, and a more competitive banking landscape in Brazil.

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