The Long-Term Effect of Digital Innovation on Bank Performance: An Empirical Study of Swift Adoption in Financial Services
CEP Discussion Paper No 992 (2017)
52 Pages Posted: 9 Jun 2017
Date Written: March 20, 2017
We examine the impact on bank performance of the adoption of SWIFT, a network-based technological infrastructure and set of standards for worldwide interbank telecommunication. We construct a new longitudinal dataset of 6848 banks in 29 countries in Europe and the Americas with the full history of adoption since SWIFT’s initial operations in 1977. Our results suggest that the adoption of SWIFT:
(i) has large effects on profitability in the long-term;
(ii) these profitability effects are greater for small than for large banks; and
(iii) exhibits significant network effects on performance.
We use an in-depth field study to better understand the mechanisms underlying the effects on profitability.
Keywords: Technology adoption, Bank performance, Financial services, Network innovation, SWIFT
JEL Classification: O33, N20
Suggested Citation: Suggested Citation