A banking desert is an area without traditional financial institutions and services. They are common in rural areas because large financial institutions are reluctant to operate in less populated areas that are less profitable. Two colleagues and I found that people who grow up in a bank desert on Native American reservations are at a financial disadvantage throughout their adult life. They are less likely to use traditional credit, such as a credit card or a mortgage. When they do, their payments are significantly higher than average, and they’re more likely to fall behind on payments. These effects persist even for people who move to areas with more banking services.
What still isn’t known
An important question that still hasn’t been answered is whether technology can help solve the problem. Online banking has expanded significantly, with numerous apps that make it easier to manage one’s finances without stepping foot in a branch. In theory, this could extend financial access to people in bank deserts. However, we found that bank deserts have long lasting effects despite the recent proliferation of online banking, suggesting that online banking does not fully replace having a local bank nearby. https://offre-banque.fr/
What else is happening
Our research on Native American bank deserts is related to ongoing policy research that seeks to understand how banking can be sustained on reservations. Though we focus on how people are affected by lack of access to finance, there are also important gaps for small businesses that need credit to grow their businesses.