Physical Frictions and Digital Banking Adoption

Forthcoming in Management Science

53 Pages Posted: 20 Feb 2019 Last revised: 7 Dec 2023

See all articles by Hyun-Soo Choi

Hyun-Soo Choi

College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Roger Loh

Singapore Management University - Lee Kong Chian School of Business

Date Written: December 6, 2023

Abstract

The behavioral literature suggests that minor frictions can elicit desirable behavior without obvious coercion. Using closures of ATMs in a densely populated city as an instrument for small frictions to physical banking access, we find that customers affected by ATM closures increase their usage of the bank's digital platform. Other spillover effects of this adoption of financial technology include increases in point-of-sale (POS) transactions, electronic funds transfers, automatic bill payments and savings, and a reduction in cash usage. Our results show that minor frictions can help overcome the status-quo bias and facilitate significant behavior change.

Keywords: Frictions; Digital Banking; FinTech; Geography; Household Finance; Financial Inclusion

JEL Classification: D12, D14, G21, G40, O33

Suggested Citation

Choi, Hyun-Soo and Loh, Roger, Physical Frictions and Digital Banking Adoption (December 6, 2023). Forthcoming in Management Science, Available at SSRN: https://ssrn.com/abstract=3333636 or http://dx.doi.org/10.2139/ssrn.3333636

Hyun-Soo Choi

College of Business, Korea Advanced Institute of Science and Technology (KAIST) ( email )

85 Hoegiro Dongdaemun-Gu
Seoul 02455
Korea, Republic of (South Korea)

Roger Loh (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

Lee Kong Chian School of Business
50 Stamford Rd
Singapore, 178899
Singapore

HOME PAGE: http://www.mysmu.edu/faculty/rogerloh/

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