A behavioral literature suggests that nudges can elicit desirable behavior without obvious coercion. Using ATM closures in a dense city as an instrument for minor frictions to physical banking access, we show that affected customers' travel distance to ATMs increases and their ATM activity declines. Importantly, this small friction induces them to increase their usage of the bank's digital platform. Other spillover effects include increases in point-of-sale (POS) transactions, electronic funds transfers, automatic bill payments and savings, and a reduction in cash usage. Our results show that minor frictions can help overcome the status-quo bias and facilitate significant behavior change.

Keywords: Nudge; Digital Banking; FinTech; Geography; Household Finance; Financial Inclusion

JEL Classification Codes: D12, D14, G21, G40, O33​