As banks rush to digitize their operations, many have found that closing their local branches can help maintain a high return on an otherwise pricy transformation. European banks, for example, closed over 9,000 branches in 2016, which represents a 4.6% reduction in a single year. According to our calculations, using data from the Swedish Bankers’ Association, a full one-quarter of bank branches in Sweden have shuttered over the past four years. In the United States, the total number of bank branches has dropped by 8.2% since 2013, and shrank by more than 1,700 in 2017 alone. This rapid transformation is also occurring in Asian banks, where services are being digitalized, bank functions are being centralized, and local bank branches are closing down.
Research: The Digitization of Banks Disproportionately Hurts Women Entrepreneurs
As banks rush to digitize their operations, many have found that closing their local branches can help maintain a high return on an otherwise pricy transformation. But research finds that this ongoing transformation has clear downsides for entrepreneurs in general and women in particular. It turns out that women entrepreneurs who seek to finance their ventures using bank loans are increasingly forced to find solutions elsewhere. And compared to men, women entrepreneurs are pushed into desperate and extreme types of financing, including not paying taxes or invoices on time, breaking credit agreements, and the use of undocumented workers. Why? Gender provides an “implicit background identity” for a banker when assessing an entrepreneur. This identity can bias financing decisions on paper, which is increasingly the preferred method of evaluation as banks digitize. But if the banker meets with the entrepreneur, that identity may change. Thus, a lack of interactions between banks and entrepreneurs allows for initial stereotypes to frame bankers’ perceptions of entrepreneurs, which may be amplified when no actual social interactions occur that could change these stereotypes.