Banking Competition and Access to Cash and Retail Banking Services in Rural Canada

We study the accessibility and competitive structure of Canadian retail banking and cash services in rural, localized markets using the Bresnahan-Reiss entry threshold framework. We estimate population thresholds required to support a given number of establishments in two segments of the financial industry: retail banking services (financial institution branches) and cash services (branches and ATMs). The first retail banking services branch requires about 500 residents in an average market, whereas the first cash services location requires about 80 residents. Our estimates indicate that retail banking-services markets become effectively competitive once three branches are present, whereas additional cash-service locations may be spatially differentiated for price-insensitive consumers. We also find meaningful regional heterogeneity: public banking is associated with greater access to retail banking services, while stricter regulatory requirements are associated with reduced access to cash services.