Interoperability, Payment Substitution, and Household Financial Fragility

This paper estimates the causal effect of the Central Reserve Bank of Peru's (BCRP) Retail Payments Interoperability Strategy on payment instrument choice and household financial fragility in Peru. Interoperability connected previously segmented digital-wallet networks and payment rails, reducing compatibility and coordination frictions that limit the effective use of digital payments. I combine quarterly microdata from the National Household Survey (ENAHO, 2022–2024) with administrative information to build a predetermined district-level exposure measure based on the relative pre-rollout (December 2022) presence of institutions that become interoperable in each implementation phase. I exploit the staggered rollout and this territorial heterogeneity in a staggered-adoption difference-in-differences design following Callaway and Sant'Anna (2021), complemented with robustness checks and placebo tests. The results suggest a reallocation away from traditional instruments toward more digitized payment channels enabled by interoperability. In particular, I find a decline in cash use for everyday and recurring expenditures and a reduction in card use, alongside an increase in digital channel use (internet banking: +3.3 pp). In parallel, financial fragility falls by 2.3–2.4 pp, consistent with lower liquidity frictions and a greater ability to smooth shocks through timely transfers. The evidence is consistent with a technology channel, as more exposed districts experience a 7.5–7.9 pp increase in the probability of having prepaid mobile internet, in line with households acquiring the minimum connectivity needed to operate mobile payments. Effects concentrate in districts with higher pre-treatment connectivity, human capital, and formality, indicating that interoperability can accelerate the transition away from cash, although its reach remains constrained by persistent structural barriers.