How Cyber Deposits Affect Perceived Competition in Banking Markets

In the CSBS survey, 2.2% of community banks claimed an online-only division; however, an additional 2.2% were actively planning to start one, and another 15.2% had discussed creating one. [...]we can expect the amount of cyber deposits to rise in future years, given the continuing increase in use of technology in banking. Even though bankers know the addresses of their cyber depositors, the systematic reporting of such data may impose nontrivial regulatory burdens on the banking system (and especially on smaller community banks), and this article does not necessarily call for such a change. KEY TAKEAWAYS * Banks are increasingly gathering deposits using onlineonly "cyber" branches. * These cyber deposits can have a nontrivial effect on the measured level of concentration in banking markets nationwide. * Depending on the nature of the market, adjusting for these cyber deposits could make the measured levels of concentration increase or decrease.