Competition for retail deposits between commercial banks and non-bank operators: a two-sided platform analysis

Paolo Siciliani

No 728, Bank of England working papers from Bank of England

Abstract: Commercial banks’ mainstream business model, which is reliant on a stable supply of retail deposits, continues to be challenged by new and innovative sources of non-bank competition. This paper examines the implications of one such source: a substitute for commercial banks’ personal and saving accounts that provides a safer money storage option thanks to access to a central bank’s balance sheet. I model competition for retail deposits between a bank and a non-bank payment service operator by adopting the two-sided platform framework to capture the payment functionality between consumers and merchants under various configurations. I show that banks’ mainstream business model is most vulnerable when consumers perceive the two service providers as close substitutes; they have the option to sign up with both service providers; their distribution of deposit is skewed; and they are not allowed to make payments across platforms.

Keywords: Two-sided platforms; retail deposit; non-bank payment service operator; central bank digital currency (search for similar items in EconPapers)
JEL-codes: D43 G21 L15 L20 L50 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2018-05-25
New Economics Papers: this item is included in nep-ban, nep-com and nep-pay
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0728

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