Beyond Banks and ATMs: When Institutions and Regulation Drive Bank Deposit Mobilization

Why do some countries mobilize far more bank deposits than others, even when banking infrastructure appears broadly comparable? This paper examines whether deposit mobilization depends primarily on physical outreach or, more fundamentally, on the institutional environment in which financial intermediation operates. Using cross-sectional data for 2022 covering 111 countries, the study evaluates whether outstanding deposits relative to GDP are better explained by bank branches and ATMs, or by legal and regulatory quality, controlling for differences in economic development. The empirical strategy combines a benchmark OLS specification in levels, a preferred log-transformed model motivated by data asymmetry and diagnostic weaknesses of the raw-scale benchmark, and a predictive validation layer based on six machine learning algorithms. The results indicate that regulatory quality is the strongest and most robust correlate of deposit mobilization, while infrastructure variables lose statistical significance once institutional factors are introduced. In the predictive stage, regularized linear methods outperform the more flexible nonlinear alternatives. These findings suggest that policies aimed at deepening deposit-based intermediation should place greater emphasis on institutional and regulatory credibility, alongside rather than relying solely on the expansion of banking infrastructure.