Consumer Preference & Bank Competition

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance

Gloria Yu

Topic: Consumer Preference and Bank Competition amid Digital Disruption

Speaker: Yang (Gloria) Yu, Singapore Management University

Abstract: Digital disruption (e.g., mobile banking and online lending) changes consumers’ preference for brick-and-mortar branches. This paper shows that the shift of tech-savvy consumers’ preference from branch services to digital services affects how banks compete and consequently exacerbates the issue of digital inequality in financial inclusion. Exploiting the staggered expansion of 3G networks across the U.S., we show that 1) banks shut down costly branches, especially in regions with more tech-savvy consumers; 2) new entry from banks without branches intensifies the local competition; 3) banks with (without) branches charge high (low) prices. As a result, tech-unsavvy consumers who prefer brick-and-mortar branches have to pay a higher cost to access financial services. Consistently, survey results confirm that 3G coverage poses the risk of financial exclusion on tech-unsavvy consumers. To establish a causal claim, we use a staggered difference-in-difference specification and further instrument 3G expansion with the frequency of lightning strikes. Overall, this paper highlights the implications of heterogeneous consumer preference following digital disruption on bank competition and consumer welfare.

Moderator: Kenny Phua, University of Technology Sydney

Date: Wednesday, 16th February 2022
Time: 4-5 pm (Australian Eastern Daylight Time)
Venue: This is an online Zoom webinar.

Seminar protocols:

  • The webinar will run for 45 minutes, followed by a 15 minute Q&A session.
  • There will be a moderator for each seminar event, who will facilitate communication and resolve any technical issues.
  • Participants can use the chat facility or raise their had to ask questions during the presentation. The moderator will then alert the speaker at the appropriate time and either ask the questions raised or unmute the participant so they can ask the question directly to the presenter.

Co-ordinator: Kenny Phua

Enquiries: Ray Alonso

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UTS acknowledges the Gadigal people of the Eora Nation, the Boorooberongal people of the Dharug Nation, the Bidiagal people and the Gamaygal people, upon whose ancestral lands our university stands. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands.