Online banking clients versus offline banking clients: Why are their asset returns different?

Abstract

This study investigates why the asset returns of online banking clients and offline clients differ. First, we demonstrate that households with high financial literacy are more likely to use online banking services. Second, a marginal increase in stockholdings increases the total asset returns of online clients. Third, low financial literacy leads households to refrain from use of online services, which results in them preferring fixed-income returns. We conclude that high household financial literacy moderates the positive relationship between online banking, stock market participation, and total asset returns. Offline clients overestimate risk and refrain from participating in stock markets.

Keywords: Online Banking; Portfolio Investment; Risk Appetite; Debt Repayment; Mortgage Debt

JEL Classification: G50, G51, G53, G59