Digital Transformation and Financial Inclusion: The Case of Instant Payments in Brazil

Pix represented one of the most profound transformations of Brazil's payment system by introducing a low-cost, interoperable, and public instant payment infrastructure available nationwide in November 2020. This paper examines how Pix diffusion has been associated with changes in local banking markets. The results indicate that Pix expansion is associated with deposit growth and credit expansion in municipalities with lower initial levels of digital infrastructure, with particular increases in savings deposits and rural credit. The findings suggest that a public and interoperable instant payment infrastructure can foster financial deepening and broaden access to formal banking services, especially in municipalities that were initially more constrained by limited digital infrastructure.