While fintech services like Venmo and Paypal offer app-based, online alternatives for basic banking needs, many Americans are finding it harder鈥攏ot easier鈥攖o access financial services. These people live in 鈥渂anking deserts鈥濃�攃ommunities, both rural and urban, where the presence of mainstream banks is slim to none. Though some analysts have suggested digital fixes for the issue, two Carroll School marketing professors published findings that suggest the best remedy for banking deserts may be high-touch, not high-tech.
Associate Professor Linda Salisbury and Associate Professor and Haub Family Faculty Fellow Gergana Nenkov partnered with two professors from the College of Business at Florida State University, Martin Mende and Maura Scott, in their research, which last year. Their article, 鈥淚mproving Financial Inclusion Through Communal Financial Orientation: How Financial Service Providers Can Better Engage Consumers in Banking Deserts,鈥� argues that financial consumers in banking deserts may more readily engage with a mainstream bank if their neighborhood branch fosters what the researchers call a 鈥渃ommunal financial orientation.鈥� In other words, banks can do more business in banking deserts if they emphasize to consumers that actions like opening new accounts, depositing paychecks, borrowing money, and making timely loan repayments doesn't just improve their own financial stability; it benefits the community as a whole.听
According to , more than 4,800 U.S. bank branches closed between 2009 and 2014, representing five percent of all branches nationwide. 鈥淏anking deserts are systematically linked to poverty and often to people of color,鈥� note the Carroll School professors and their collaborators, 鈥渁s traditional banks鈥攖ypically driven by economic motives鈥攔e-allocate their branches and services away from relatively poorer communities to more prosperous ones.鈥�
This point has been widely discussed in publications including , as the emergence of banking deserts makes the path out of poverty more difficult for residents in these communities. 鈥淚f people don鈥檛 readily have access to banks,鈥� explained Salisbury in an interview, 鈥渢hey may need to rely on alternative service providers that are more expensive,鈥� like payday lenders and check-cashing services.听
Meanwhile, research on the psychology of poverty has shown that consumers with less financial means tend to be more communally oriented than their wealthier counterparts. A well-off working mother can afford a nanny to watch her children, while a poor mom with two hourly jobs may turn to family, friends, or neighbors for help with childcare. 鈥淭his interdependence,鈥� the researchers explain, 鈥渕akes [low-income consumers] more concerned with the needs of others and more likely to act pro-socially to improve the welfare of their communities.鈥�
From this research emerged the prediction that Salisbury, Nenkov, and their coauthors make for how mainstream banks can better serve low-income communities while bolstering their business in those areas: by 鈥渆mphasizing the link between a consumer鈥檚 financial engagement with the bank and the community鈥檚 well-being.鈥�
Through a combination of field study and experimentation, the researchers tested their theory. They compared attitudes of consumers at a credit union that operates branches in a banking desert area as well as in more affluent neighborhoods. The findings supported what the researchers had expected: banking-desert consumers responded more positively to financial services that prioritize communal finance over personal finance, as compared to the bank鈥檚 wealthier patrons. Thus, the researchers conclude, mainstream banks looking to operate in banking deserts should proactively foster the sense that engaging with their bank branch benefits the whole community, not just the individual consumer. Beyond using the bank鈥檚 services themselves, banking-area residents are also inclined to give word-of-mouth recommendations across their tight-knit communities.
The article not only calls for financial service providers to learn 鈥渢he language of the poor,鈥� but, as Salisbury explained, its findings present an actionable 鈥渨in-win鈥� proposition for both consumer and bank. 鈥淐onveying a communal financial orientation can enable banks to more successfully engage consumers in banking deserts, supporting financial inclusion [in poor communities] and ultimately benefiting the local economy as well.鈥�
鈥擫eslie Ganson, with reporting by Andrew Clark
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