Impact of Digital-Only Bank Adoption on Consumer Consumption : Empirical Evidence

Emerging digital-only banks without any offline branches (i.e., digital banks), such as Chime in the U.S. and WeBank in China, are reshaping the legacy banking industry with their novel business model. However, the extant literature focuses mainly on traditional banks’ digital channels (e.g., online banking services), while paying relatively scant attention to digital banks. Thus, the ongoing policy debate swirls around digital banks’ impact on consumers and traditional banks. Against this backdrop, this study examines the impact of consumers’ digital bank adoption on their financial products, offline consumption, and online consumption-related transaction behavior across traditional and digital banks. To this end, we exploit a unique dataset on more than 100,000 consumers’ every transaction with all their digital and traditional banks over 18 months. This study provides valuable implications for policymakers as well as traditional and digital banks regarding the potential benefits and concerns of this new business model.