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Cost structures and new technology: a case study of a bank in South Africa

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  • Charles C. Okeahalam
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    Abstract

    There has been considerable development in the technology used to provide bank services. This has led to an increase in the number of channels which can be used to deliver bank services to retail clients. Accordingly, there is a need to assess the costs of using different technologies to provide services to retail bank clients. In this paper, detailed cost data are used to estimate two stochastic frontier models of the cost of providing retail services for clients who use the branch bank teller and those who use an information technology based approach. We remove the inefficiencies in the cost estimates of the two different technologies to enable forecasts of the cost consequences of shifts in technology to be based on production technique best practice. The findings suggest that benefits can be obtained by reducing inefficiency and by extending new technology more broadly to lower income retail clients.

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    Bibliographic Info

    Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Financial Services Management.

    Volume (Year): 1 (2005)
    Issue (Month): 1 ()
    Pages: 41-65

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    Handle: RePEc:ids:ijfsmg:v:1:y:2005:i:1:p:41-65

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    Web page: http://www.inderscience.com/browse/index.php?journalID=76

    Related research

    Keywords: banks; cost function estimates; efficiency; South Africa; financial services; cost structures; retail banking; new technologies; automated teller machines; ATMs; internet banking; electronic banking; branch bank tellers.;

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    Cited by:
    1. Charles C. Okeahalam, 2008. "Internationalisation and firm performance: Evidence from estimates of efficiency in banking in Namibia and Tanzania," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(7), pages 942-964.

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