Can Internet Banking Affect Households' Participation in Financial Markets and Financial Awareness?

63 Pages Posted: 25 May 2021

Date Written: April 20, 2021

Abstract

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

Viviano, Eliana and Michelangeli, Valentina, Can Internet Banking Affect Households' Participation in Financial Markets and Financial Awareness? (April 20, 2021). Bank of Italy Temi di Discussione (Working Paper) No. 1329, Available at SSRN: https://ssrn.com/abstract=3852384 or http://dx.doi.org/10.2139/ssrn.3852384

Eliana Viviano

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Valentina Michelangeli (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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