Can Internet Banking Affect Households' Participation in Financial Markets and Financial Awareness?
63 Pages Posted: 25 May 2021
Date Written: April 20, 2021
We are in a digital era. Internet banking has been increasingly offered by banks (through simple websites and easy-to-use mobile apps) and demanded by customers for managing their own finances without going to the physical branch. The availability of this new channel to interact with financial intermediaries can reduce households' cost of acquiring information and the time spent for financial transactions; therefore, it could also impact on households' choice to start investing in financial markets. As the decisions to adopt Internet banking and to entry into financial markets could be jointly determined, we derive a measure of bank supply of Internet-based services, which constitutes our instrumental variable and it is assigned to each household in the sample. We find that the adoption of Internet banking induces households to participate in financial markets and, in particular, to hold short term assets with a low risk/return profile. Over time the adoption of Internet banking also drives a higher understanding of basic standard financial concepts.
Keywords: Internet banking, financial market participation, household finance
JEL Classification: D14, G11, O33
Suggested Citation: Suggested Citation