Economics of Payments XII Conference, October 26, 2023

TL;DR

Bank branch closures following robberies in Brazil reduced cash availability and encouraged adoption and use of PIX, a digital payment technology. The effects extended to unaffected banks, especially digital institutions, and were associated with increased credit provision. PIX adoption was higher in areas with stronger economic, educational, service-sector, and internet conditions, making the detailed findings worth reading on.

Transcript

the Federal Reserve System works every day to support a growing and stable us economy across the United States the Federal Reserve through its Federal Reserve education program also helps people understand how the economy works so consumers have the tools to make sound financial decisions through this education program teachers have access to class... Read More

Key Insights

• 🥺 Bank branch closures due to robberies in Brazil led to a decrease in cash availability and an increase in the adoption and usage of the digital payment technology called PIX.
• 🏦 The effects of bank branch closures spilled over to unaffected banks, particularly digital institutions, leading to increased adoption of PIX and provision of credit.
• ✋ The adoption of PIX was higher in areas with higher GDP per capita, literacy rates, share of the service sector, and internet access.
• ❓ The adoption of PIX and the decrease in cash usage highlight the potential benefits of digital payment technologies in promoting financial inclusion and reducing reliance on cash.

Questions & Answers

Q: How did bank branch closures following robberies affect PIX adoption in Brazil?

The closures reduced access to cash and increased adoption and use of PIX as an alternative payment method. The study therefore connects lower cash availability with greater use of digital payments.

Q: Did bank branch closures reduce cash usage?

Yes. The closures reduced cash availability, and individuals and businesses used less cash afterward.

Q: Did the effects extend to banks whose branches were not closed?

Yes. The effects spilled over to unaffected banks, particularly digital institutions, which experienced increased PIX adoption.

Q: How was PIX adoption related to credit provision by digital institutions?

PIX adoption was associated with increased credit provision by digital institutions. The increase was particularly evident in lending to corporate clients.

Q: Which local conditions were associated with higher PIX adoption?

PIX adoption was higher in areas with higher GDP per capita and literacy rates. It was also higher where the service sector had a larger share and internet access was greater.

Q: What are the three main entities of the Federal Reserve System?

The three entities are the Federal Reserve Board of Governors, the 12 Federal Reserve Banks, and the Federal Open Market Committee. Together, they support the economy and the stability of the financial system.

Q: What payment-system functions do the Federal Reserve Banks perform?

The Reserve Banks help distribute currency and coin to banks, operate electronic payment systems, and clear checks. They also provide financial services to banks, thrifts, and credit unions.

Q: What educational resources does the Federal Reserve provide?

Federal Reserve education offers free classroom-ready resources, including videos, lessons, online education, and publications. Regional Reserve Banks also provide professional development, exhibits, tours, internships, and student-board opportunities.

Summary & Key Takeaways

• The study focuses on the impact of bank branch closures due to robberies in Brazil on payment technologies and cash usage.

• Bank branch closures led to a reduction in cash inventory and an increase in the adoption and usage of the new payment technology called PIX.

• The effects of bank branch closures and the adoption of PIX spilled over to unaffected banks, particularly digital institutions, leading to increased provision of credit.