IDEAS home Printed from https://ideas.repec.org/p/bca/bocawp/21-28.html
   My bibliography  Save this paper

Consumer Cash Withdrawal Behaviour: Branch Networks and Online Financial Innovation

Author

Listed:
  • Heng Chen
  • Matthew Strathearn
  • Marcel Voia

Abstract

Constructing a novel micro-geographic individual-level data set, we study the relevance of shoe-leather costs on cash withdrawals. An unexplored issue in the literature is the consistent estimation of the marginal effect of travel distance on withdrawals when a fraction of unobserved withdrawals have free/low shoe-leather cost; i.e., consumers withdraw upon conveniently encountering a free/low cost withdrawal opportunity. To overcome this challenge, we propose a classification technique to identify respondents who have incurred these free/low cost withdrawals, and subsequently account for such endogenous selection from the exclusion restriction of the adoption of recent online financial innovations. We find that there exist significant threshold effects of distance on typical monthly withdrawal frequency. For respondents living within 1.56 kilometers of their affiliated financial institution, a one-kilometer reduction in distance is associated with an average marginal increase of 0.31 withdrawals per month. In terms of heterogeneous effects, distance plays a larger role in higher-income and older-age cohorts. These results are robust to various econometric specifications.

Suggested Citation

  • Heng Chen & Matthew Strathearn & Marcel Voia, 2021. "Consumer Cash Withdrawal Behaviour: Branch Networks and Online Financial Innovation," Staff Working Papers 21-28, Bank of Canada.
  • Handle: RePEc:bca:bocawp:21-28
    as

    Download full text from publisher

    File URL: https://www.bankofcanada.ca/wp-content/uploads/2021/06/swp2021-28.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hans Degryse & Steven Ongena, 2005. "Distance, Lending Relationships, and Competition," Journal of Finance, American Finance Association, vol. 60(1), pages 231-266, February.
    2. Cameron,A. Colin & Trivedi,Pravin K., 2013. "Regression Analysis of Count Data," Cambridge Books, Cambridge University Press, number 9781107667273.
    3. Jason Allen & Robert Clark & Jean-François Houde, 2008. "Market Structure and the Diffusion of E-Commerce: Evidence from the Retail Banking Industry," Staff Working Papers 08-32, Bank of Canada.
    4. Joshua D. Coval & Tobias J. Moskowitz, 1999. "Home Bias at Home: Local Equity Preference in Domestic Portfolios," Journal of Finance, American Finance Association, vol. 54(6), pages 2045-2073, December.
    5. Helmut Stix, 2020. "The Austrian bank branch network from 2000 to 2019 from a spatial perspective," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 40, pages 87-101.
    6. Mark Grinblatt & Matti Keloharju, 2001. "How Distance, Language, and Culture Influence Stockholdings and Trades," Journal of Finance, American Finance Association, vol. 56(3), pages 1053-1073, June.
    7. Hyslop, Dean R & Imbens, Guido W, 2001. "Bias from Classical and Other Forms of Measurement Error," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 475-481, October.
    8. Heng Chen & Matthew Strathearn, 2020. "A Spatial Model of Bank Branches in Canada," Staff Working Papers 20-4, Bank of Canada.
    9. Ben Fung & Kim Huynh & Anneke Kosse, 2017. "Acceptance and Use of Payments at the Point of Sale in Canada," Bank of Canada Review, Bank of Canada, vol. 2017(Autumn), pages 14-26.
    10. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-632, Nov.-Dec..
    11. Anneke Kosse & Heng Chen & Marie-Hélène Felt & Valéry Dongmo Jiongo & Kerry Nield & Angelika Welte, 2017. "The Costs of Point-of-Sale Payments in Canada," Discussion Papers 17-4, Bank of Canada.
    12. Terza, Joseph V., 1998. "Estimating count data models with endogenous switching: Sample selection and endogenous treatment effects," Journal of Econometrics, Elsevier, vol. 84(1), pages 129-154, May.
    13. Casey B. Mulligan & Xavier Sala-i-Martin, 1995. "Adoption of financial technologies: Implications for money demand and monetary policy," Economics Working Papers 134, Department of Economics and Business, Universitat Pompeu Fabra.
    14. Nuria Gallego & Carlos Llano, 2014. "The Border Effect and the Nonlinear Relationship between Trade and Distance," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1016-1048, November.
    15. Christopher Henry & Kim Huynh & Angelika Welte, 2018. "2017 Methods-of-Payment Survey Report," Discussion Papers 18-17, Bank of Canada.
    16. Hoai-Luu Q. Nguyen, 2019. "Are Credit Markets Still Local? Evidence from Bank Branch Closings," American Economic Journal: Applied Economics, American Economic Association, vol. 11(1), pages 1-32, January.
    17. Taraneh Abarin & Liqun Wang, 2012. "Instrumental variable approach to covariate measurement error in generalized linear models," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 64(3), pages 475-493, June.
    18. Pierre Bachas & Paul Gertler & Sean Higgins & Enrique Seira, 2018. "Digital Financial Services Go a Long Way: Transaction Costs and Financial Inclusion," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 444-448, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rosy Locorotondo & Nico Dewaelheyns & Cynthia Hulle, 2015. "Affiliates’ Bank Debt Policy: Does Parent Firm Nationality Matter?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(5-6), pages 747-776, June.
    2. Marie-Hélène Felt, 2020. "Losing Contact: The Impact of Contactless Payments on Cash Usage," Staff Working Papers 20-56, Bank of Canada.
    3. Kim Huynh & Gradon Nicholls & Mitchell Nicholson, 2019. "2018 Merchant Acceptance Survey," Staff Analytical Notes 2019-31, Bank of Canada.
    4. Li, Mingsheng & Zhao, Xin, 2016. "Neighborhood effect on stock price comovement," The North American Journal of Economics and Finance, Elsevier, vol. 35(C), pages 1-22.
    5. Angelika Welte & Jozsef Molnar, 2021. "The market for acquiring card payments from small and medium-sized Canadian merchants," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 56(2), pages 87-97, April.
    6. Engert, Walter & Fung, Ben & Segendorf, Björn, 2019. "A Tale of Two Countries: Cash Demand in Canada and Sweden," Working Paper Series 376, Sveriges Riksbank (Central Bank of Sweden).
    7. Sadok El Ghoul & Omrane Guedhami & Yang Ni & Jeffrey Pittman & Samir Saadi, 2012. "Does Religion Matter to Equity Pricing?," Journal of Business Ethics, Springer, vol. 111(4), pages 491-518, December.
    8. Liu, Cai, 2021. "The IRB model, bank regulatory arbitrage, and the Eurozone crisis," Journal of International Money and Finance, Elsevier, vol. 116(C).
    9. Orkun Saka, 2019. "Domestic Banks as Lightning Rods? Home Bias and Information during the Eurozone Crisis," CESifo Working Paper Series 7939, CESifo.
    10. Walter Engert & Ben Fung & Björn Segendorf, 2019. "A Tale of Two Countries: Cash Demand in Canada and Sweden," Discussion Papers 2019-7, Bank of Canada.
    11. Ridhwan, M.M. & Nijkamp, P. & Rietveld, P., 2008. "Regional development and monetary policy : a review of the role of monetary unions, capital mobility and locational effects," Serie Research Memoranda 0007, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    12. Geneviève Vallée, 2018. "How Long Does It Take You to Pay? A Duration Study of Canadian Retail Transaction Payment Times," Staff Working Papers 18-46, Bank of Canada.
    13. Uysal, Vahap B. & Kedia, Simi & Panchapagesan, Venkatesh, 2008. "Geography and acquirer returns," Journal of Financial Intermediation, Elsevier, vol. 17(2), pages 256-275, April.
    14. Joel Houston & Jennifer Itzkowitz & Andy Naranjo, 2012. "Corporate Borrower Nationality and Global Presence: Cross-Country Evidence on the Pricing of Syndicated Bank Loans," Chapters, in: James R. Barth & Chen Lin & Clas Wihlborg (ed.), Research Handbook on International Banking and Governance, chapter 5, Edward Elgar Publishing.
    15. Knyazeva, Anzhela & Knyazeva, Diana, 2012. "Does being your bank’s neighbor matter?," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 1194-1209.
    16. Cici, Gjergji & Gehde-Trapp, Monika & Göricke, Marc-André & Kempf, Alexander, 2014. "What they did in their previous life: The investment value of mutual fund managers' experience outside the financial sector," CFR Working Papers 14-11, University of Cologne, Centre for Financial Research (CFR).
    17. Ishii, Joy & Xuan, Yuhai, 2014. "Acquirer-target social ties and merger outcomes," Journal of Financial Economics, Elsevier, vol. 112(3), pages 344-363.
    18. Ning Jia, 2017. "Diversification of pre-IPO ownership and foreign IPO performance," Review of Quantitative Finance and Accounting, Springer, vol. 48(4), pages 1031-1061, May.
    19. Chan, Kalok & Covrig, Vicentiu, 2012. "What determines mutual fund trading in foreign stocks?," Journal of International Money and Finance, Elsevier, vol. 31(4), pages 793-817.
    20. Mishra, Anil V., 2016. "Foreign bias in Australian-domiciled mutual fund holdings," Pacific-Basin Finance Journal, Elsevier, vol. 39(C), pages 101-123.

    More about this item

    Keywords

    Bank notes; Digital currency and fintech;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R22 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other Demand

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:21-28. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/bocgvca.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/bocgvca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.