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Politics and Government


Michael Hendricks

Mentor Department

Politics and Government


The influence of the internet can be found across all industries in the United States, and financial institutions are no exception to this. As the consumer banking industry shifts to an increasing online presence, research has largely ignored the impacts this might have on low- to moderate-income households. Online banking can be an effective and useful tool for managing finances; however, data indicates that access to the internet is not evenly distributed across income brackets. Additionally, lower-income households are more likely to complete bank transitions in-person. Does this gap in access to the internet and the differences in the use of online banking services translate into experienced differences in financial outcomes for low- to moderate-income households? If so, how? I hypothesize that as the level of access to online banking decreases for low- to moderate-income populations, the level of financial well-being will decrease. I examine this concept through quantitative analyses using the 2018 National Financial Capability Study which provides state-by-state data regarding attributes of individuals' financial situations including savings, employment, financial confidence, online banking use, and more. This study is one of the first national surveys to employ the Consumer Finance Protection Bureau’s newly developed financial well-being score. The financial well-being score is not a measure of wealth or income, but a measure of choices in finance. An individual with a high income can have a low score and vice versa for low-income individuals. The financial well-being score provides a relatively new perspective to the contested idea of what financial outcomes are, and it is meant to capture an individual's social and economic environment which impacts their personality and attitudes, decision context, knowledge and skills, available opportunities, and behavior. While the 2018 National Financial Capability Study data does not provide geographic information that would allow for calculating area median income, studies indicate 44% of adults who have household incomes of $30,000 a year or less do not have broadband service. I use this established measure for determining the individuals included in my dependent variable. My independent variable was created using a factor analysis of online banking variables. My findings from this quantitative study provide insight into policy creation and activities for financial institutions to better understand how to serve low- to moderate-income households and improve their financial outcomes.

The Impact Of Online Banking On Financial Well-Being