The Long-Term Effect of Digital Innovation on Bank Performance: An Empirical Study of Swift Adoption in Financial Services

Research Policy, Vol. 46, No. 5, 2017

CEP Discussion Paper No 992 (2017)

52 Pages Posted: 9 Jun 2017

See all articles by Susan Scott

Susan Scott

London School of Economics & Political Science (LSE)

John Van Reenen

Massachusetts Institute of Technology (MIT)

Markos Zachariadis

Alliance Manchester Business School, University of Manchester

Date Written: March 20, 2017

Abstract

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

Scott, Susan and Van Reenen, John and Zachariadis, Markos, The Long-Term Effect of Digital Innovation on Bank Performance: An Empirical Study of Swift Adoption in Financial Services (March 20, 2017). Research Policy, Vol. 46, No. 5, 2017, CEP Discussion Paper No 992 (2017), Available at SSRN: https://ssrn.com/abstract=1967964

Susan Scott

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

John Van Reenen

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Markos Zachariadis (Contact Author)

Alliance Manchester Business School, University of Manchester ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom
M15 6PB (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
286
Abstract Views
1,043
rank
148,374
PlumX Metrics