Digital Bank Entries and Deposit Market Segmentation: Evidence from Colombia
Rodrigo Londoño van Rutten (Université de Namur, Faculty of Economics, Social Sciences and Business Administration)
Abstract
I examine the entry of two app-only banks into Colombian deposit markets, using supervisory data on the rate each bank pays and on the balances held at each of its branches, from 2018 to 2026. Identification uses the staggered local adoption of the first entrant and, for the second, a local exposure fixed before it existed. Where the first entrant is adopted, the highest rate among the banks present in the municipality rises by close to three percentage points, while the rate earned by the average peso of local deposits does not move and the incumbents do not reprice. The deposits that follow the entrant are few and sit in the richer, better educated municipalities. In 193 municipalities the entrant is the first bank. The second entrant, which also sells a term deposit, is associated with a lower lending rate at the incumbents in the municipalities the first entrant had already reached, with no movement in the savings-account rate. Digital entry widens the range of local rates without moving the rate most savers receive.