How the Internet Affects Output and Performance at Community Banks
Journal of Banking & Finance, Vol. 31, pp. 1033-1060, 2007
28 Pages Posted: 20 Jan 2012
Date Written: 2007
Abstract
Internet web sites have become an important alternative distribution channel for most banking institutions. However, we still know little about the impact of this delivery channel on bank performance. We observe 424 community banks among the first wave of US banks to adopt transactional banking web sites in the late-1990s, and compare the change in their 1999-2001 financial performance to that of 5175 branching-only community banks. Whereas today virtually all viable community banking franchises offer he Internet banking channel, studying this earlier time period allows us to make clean comparisons between subsamples of "brick-and-mortar" and "click-and-mortar" community banks. We find that Internet adoption improved community bank profitability, chiefly through increased revenues from deposit service charges. Internet adoption was also associated with movements of deposits from checking accounts to money market deposit accounts, increased use of brokered deposits, and higher average wage rates for bank employees. We find little evidence of changes in loan portfolio mix. Our findings suggest that these initial click-and-mortar banks (and their customers) used the Internet channel as a complement to, rather than a substitute for, physical branches.
Keywords: Internet Banking, Community Banks, Banking System, Bank Branching
JEL Classification: G2, G20, G21, G28, L2
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Performance of Internet-Based Business Models: Evidence from the Banking Industry
-
Technological Change, Financial Innovation, and Diffusion in Banking
By W. Scott Frame and Lawrence J. White
-
Technological Change, Financial Innovation, and Diffusion in Banking
By W. Scott Frame and Lawrence J. White
-
Technological Change, Financial Innovation, and Diffusion in Banking
By W. Scott Frame and Lawrence J. White
-
Is the Internet Delivery Channel Changing Banks' Performance? The Case of Spanish Banks
By Ignacio Hernando and Maria Nieto
-
The Evolution of Eft Networks from Atms to New On-Line Debit Payment Products
-
Internet Banking: An Exploration in Technology Diffusion and Impact
By Richard J. Sullivan and Zhu Wang
-
By Karen Furst, William W. Lang, ...