Physical Frictions and Digital Banking Adoption

Hyun-Soo Choi () and Roger K. Loh ()
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Hyun-Soo Choi: College of Business, Korea Advanced Institute of Science and Technology, Seoul 02455, Korea
Roger K. Loh: Lee Kong Chian School of Business, Singapore Management University, Singapore 178899

Management Science, 2024, vol. 70, issue 10, 6597-6621

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.

Keywords: frictions; digital banking; fintech; geography; household finance; financial inclusion (search for similar items in EconPapers)
Date: 2024
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