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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

Matej Marinc

University of Ljubljana - Faculty of Economics

Date Written: January 24, 2013

Abstract

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

Marinc, Matej, Banks and Information Technology: Marketability vs. Relationships (January 24, 2013). Electronic Commerce Research, Vol. 13(1), p. 71–101. Available at SSRN: https://ssrn.com/abstract=1723083 or http://dx.doi.org/10.2139/ssrn.1723083

Matej Marinc (Contact Author)

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

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