Banks and Information Technology: Marketability vs. Relationships
University of Ljubljana - Faculty of Economics; University of Amsterdam
January 24, 2013
Electronic Commerce Research, Vol. 13(1), p. 71–101
This paper evaluates the impact of information technology (IT) on the operations of banks and the structure of the banking industry, including implications for stability. On the one hand, banks can focus on relationship banking and use IT developments to tailor services to individual needs and build enhanced, albeit modified, relationships with customers. On the other hand, IT better allows banks to exploit scale and scope economies, most evident in transaction banking. Another manifestation of IT is via financial innovations that have enhanced marketability. Stability enters the picture because increased marketability facilitates opportunistic behavior. Together with enhanced herding behavior and changes in industry structure, this could undermine stability and augment systemic risk, calling for a regulatory overhaul.
Number of Pages in PDF File: 39
Keywords: Banking, Information Technology, Relationship Banking, Stability, Systemic Risk
JEL Classification: G20, G21, L86, O33Accepted Paper Series
Date posted: December 18, 2010 ; Last revised: March 29, 2013
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