When Interoperability Increases Market Power: Evidence from Peru's Instant Payment Systems

Carlos Burga, Jacelly Cespedes, Carlos R Parra, Marcos Cerón and Isaí Quispe

No 14435, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Instant payment systems have rapidly gained global traction by enhancing transaction efficiency, yet evidence remains limited on how their designparticularly interoperabilityshapes market structure. We exploit Peru's 2023 interoperability mandate as a quasi-natural experiment using a difference-in-differences design. Mandated interoperability increased deposit market concentration by approximately 2%. Incumbent banks linked to the dominant digital wallet expanded their deposit market share by nearly 10% and reduced deposit interest rates by 5080 basis points. We also observe more branch closures in high-adoption areas and declining microcredit. A model explains these results through an “amenity shock,” boosting digital wallet convenience for all adopters. Due to network externalities, the largest incumbent wallet captures a disproportionate share of new users in dual-platform markets an “amenity effect” that ultimately increases concentration. By contrast, in single-platform regions, interoperability lowers barriers for new providers an “entry effect” that spurs competition and erodes incumbent dominance. Our results show that this amenity effect in dual-platform cities outweighs the entry effect elsewhere. Overall, our findings show competitive effects of interoperability mandates critically depend on initial market structure and distribution of platform market shares.

JEL-codes: E42 J31 O33 (search for similar items in EconPapers)
Date: 2025-12
References: Add references at CitEc
Citations:

Downloads: (external link)
https://publications.iadb.org/publications/english ... -Payment-Systems.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:14435

DOI: 10.18235/0013871

Access Statistics for this paper

More papers in IDB Publications (Working Papers) from Inter-American Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().