Abstract: The fringe banking industry, consisting of check cashers, payday lenders, pawn shops, rent-to-own stories, and other high-cost financial services, has grown dramatically over the last several decades in the United States. These businesses provide services but at a significant cost to some of the most financially vulnerable individuals. Debates over the fringe banking industry thus far have focused almost exclusively on the implications for immediate customers. Yet given the location of these services and the socio-economic status of their customer base, other costs are likely incurred by the communities in which these businesses are located. One potential cost for all residents is higher crime rates in communities where fringe banking establishments are concentrated. In the current study, we consider this possibility. Combining crime data and local business data for exact addresses, and census data for small units (blocks), we provide a more precise spatial analysis of the relationship between fringe baking establishments and crime rates in communities across three U.S. cities that vary along several dimensions. We test the spatial impact of fringe bankers on crime rates, and determine whether this spatial impact varies systematically across different types of communities.
Do Fringe Banks Create Fringe Neighborhoods?: Examining the Spatial Relationship between Fringe Banking and Neighborhood Crime Rates
Abstract: The fringe banking industry, consisting of check cashers, payday lenders, pawn shops, rent-to-own stories, and other high-cost financial services, has grown dramatically over the last several decades in the United States. These businesses provide services but at a significant cost to some of the most financially vulnerable individuals. Debates over the fringe banking industry thus far have focused almost exclusively on the implications for immediate customers. Yet given the location of these services and the socio-economic status of their customer base, other costs are likely incurred by the communities in which these businesses are located. One potential cost for all residents is higher crime rates in communities where fringe banking establishments are concentrated. In the current study, we consider this possibility. Combining crime data and local business data for exact addresses, and census data for small units (blocks), we provide a more precise spatial analysis of the relationship between fringe baking establishments and crime rates in communities across three U.S. cities that vary along several dimensions. We test the spatial impact of fringe bankers on crime rates, and determine whether this spatial impact varies systematically across different types of communities.