This Is AuburnElectronic Theses and Dissertations

Three Essays on Banking, Digital Finance, and Financial Inclusion.




Nguyen, Thi Hong Nguyen

Type of Degree

PhD Dissertation




The first essay examines how financial literacy affects household choice as being banked only, underbanked, or unbanked. Also, the relationship between financial literacy and household use and frequency of use of different alternative financial services is examined. The examination relies on a survey conducted by the FINRA National Investor Education Foundation’s National Financial Capability Study and data from other sources. The results indicate that differences in financial literacy across households do matter for the type, use, and degree of use of banking and alternative financial firm services. Notably, the results also show that differences in financial literacy across households do matter for substituting credit cards and AFS use. The decline in bank offices since 2009 raises concerns about reduced financial inclusion for local communities. However, banking technology, primarily transactional digital banking, provides an alternative to brick-and-mortar offices. The second chapter compares the rate of office growth between banks that invest heavily in financial technology and digital banking and those that do not. Using data on Federal Deposit Insurance Corporation (FDIC)-insured institutions from 2001 to 2019, I show that the increased use of technology has a negative impact on the growth rate of bank offices, especially after 2010. However, using the SimmonsLOCAL data from 2008 to 2019, I also find that office closures caused by the introduction of financial technology do not adversely affect local community access to banking services (i.e., financial inclusion) because people shift to online banking services. Recent literature questions the relative advantage of community banks vs. non-community banks in small business funding. The third chapter re-examines the role of community banks in providing financing to small businesses using county-level data from 2003 to 2016. The empirical results indicate that community banks are still providing more small business funding than non-community banks, especially after the Great Recession. This role is even more critical in those counties in non-metropolitan areas. The results show that in counties where community banks do not have branches, they provide fewer loans, suggesting they still rely on physical offices to maintain their relationship-banking advantage to make small business loans.