New payments technologies could limit the demand for banks’ existing payments services if those banks don’t adopt those technologies themselves. And even if they do, they could limit the margins banks earn from these operations. Similarly, for Visa and Mastercard. CBDCs could limit the ability of banks to attract retail deposits, forcing them to shift to a narrow-banking model and causing funding to shift to the shadow banking system. More generally, how will Fintech affect competition between BigTech, FinTech and established financial institutions? Relevant in this connection is whether the need for social distancing will encourage contactless payments, online shopping and otherwise accelerate this transition.
