Hyun-Soo Choi, Roger K. Loh
Management Science 70(10), 6597–6621 (2024).
Hyun-Soo Choi, Roger K. Loh. Physical Frictions and Digital Banking Adoption. Management Science 70(10), 6597–6621 (2024).
IN ONE SENTENCE:
Small obstacles to using physical banking locations can encourage customers to adopt digital banking and change how they pay and save.
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 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.
Other Links/Materials:
SSRN / paper | Journal / DOI | Internet appendix
Minor frictions can cause significant behavior change — Thought Leadership Article, MSc Fin Program at SMU
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Keywords:
Digital banking · FinTech · Household finance · Financial inclusion · ATM closures · Status quo bias · Behavior change · Cash usage · Electronic payments · Savings