Banks and Information Technology: Marketability vs. Relationships
Electronic Commerce Research, Vol. 13(1), p. 71–101
39 Pages Posted: 18 Dec 2010 Last revised: 7 Sep 2014
Date Written: January 24, 2013
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.
Keywords: Banking, Information Technology, Relationship Banking, Stability, Systemic Risk
JEL Classification: G20, G21, L86, O33
Suggested Citation: Suggested Citation