The Rise of Mobile Banking and the Displacement of Brick-and-Mortar Branches, 2014-2019

Abstract

The share of households using mobile banking has increased from 16% to 28% between 2014 and 2019. Using data across all census tracts between 2014 and 2019, we investigate the incidence of mobile banking and its relationship with traditional brick-and-mortar bank branches. First, we document three stylized facts: mobile banking is more common in areas with a higher concentration of individuals employed in information and professional services sectors, areas with higher shares of college graduates, and areas with a higher share of youth between ages 18 and 30. Second, we estimate the elasticity between mobile banking and both the incidence of banking deserts and the number of physical bank locations. Exploiting within-tract variation and controlling for time-varying shocks, we find that residents of banking deserts are 1.3-4.7% more likely to have mobile banking and that an additional physical branch opening, net of closures, is associated with a 0.3-0.7% decline in mobile banking usage. Our results suggest that mobile banking can serve as an important vehicle for financial inclusion by providing an alternate avenue for consumers to access banking services, particularly in rural communities.