Disappearing bank Branches: Evidence from China household finance survey

Abstract

This paper investigates the effect of mobile payments on household access to financial services from traditional commercial banks. Utilizing the nationally representative data from the 2019 China Household Finance Survey, we employ the People's Bank of China's 2010 issuance of the Administrative Measures on Non-financial Institution Payment Services as an instrumental variable to analyze Alipay adoption. Our findings indicate that Alipay significantly diminishes Chinese households' reliance on bank branches for financial services. The analysis reveals two main effects: firstly, Alipay reduces households' cash holdings and demand deposits; secondly, it shifts financial management activities from bank branches to online platforms. Additionally, our heterogeneity analysis shows that the shift from bank branches to Alipay is more pronounced among individuals with higher educational levels and those in urban areas. These insights contribute new micro-level evidence to the understanding of FinTech's impact on commercial banks.