Journal of Finance Vol. 81 No. 4 2026

Bank Competition Amid Digital Disruption: Implications for Financial Inclusion

Erica Xuewei Jiang^1,2; Gloria Yang Yu³; Jinyuan Zhang⁴

¹ University of Southern California · ² California Southern University · ³ Singapore Management University · ⁴ University of California, Los Angeles

Abstract

We examine how digital disruption affects bank competition using the staggered rollout of 3G mobile networks. 3G expansion increased mobile banking adoption among tech‐savvy households, reducing branch networks—especially in younger counties. Banks' strategies diverged: Less branch‐reliant banks closed branches and competed on price, while more branch‐reliant banks maintained branches but raised spreads. A structural model shows that perceived digital service improvements among younger consumers drove these shifts, reducing welfare for older savers. Counterfactuals demonstrate that subsidizing adoption for older savers can cost‐effectively reduce these disparities, facilitating a smoother digital transition.

DOI

10.1111/jofi.70051

Volume

81

Issue

4

Pages

1951-2004

Language

en

Sources

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Cite

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