Advanced Search
MyIDEAS: Login to save this paper or follow this series

Consumer Adoption of Online Banking: Does Distance Matter?

Contents:

Author Info

  • Khan, Beethika S.
Registered author(s):

    Abstract

    This paper tests whether consumer adoption of online banking is affected by the distance to one’s bank branch. During the last decade, rapid diffusion of the Internet has dramatically changed the ways consumers conduct every-day businesses. An important trend in the rapid increase of Internet use among U.S. households is the use of the Internet for accessing financial accounts and paying bills. I estimate a logit model for online banking use with household level data from the U.S. for 1998 and 2001. In order to correct for the possible endogeneity of distance to one’s bank, I use instrumental variables in a logit framework by following the control function approach suggested by Petrin and Train (2002). I find that distance to the closest bank branch does not affect the likelihood of online banking use by a household. The type of financial account that one has with her financial institution, however, is a significant predictor of online banking use, implying that households are likely to use the online provision more for some accounts than others. The results suggest that online channels may be viewed as a supplement to other more traditional channels. I also find that the impacts of various individual and bank-specific characteristics on online banking use have changed from 1998 to 2001. This is not surprising given the rapid diffusion of the Internet in the late 1990s, and the corresponding rise in the availability, acceptance and familiarity of the Internet as an additional business channel.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.escholarship.org/uc/item/2bt1d76s.pdf;origin=repeccitec
    Download Restriction: no

    Bibliographic Info

    Paper provided by Department of Economics, Institute for Business and Economic Research, UC Berkeley in its series Department of Economics, Working Paper Series with number qt2bt1d76s.

    as in new window
    Length:
    Date of creation: 04 May 2004
    Date of revision:
    Handle: RePEc:cdl:econwp:qt2bt1d76s

    Contact details of provider:
    Postal: F502 Haas, Berkeley CA 94720-1922
    Phone: (510) 642-1922
    Fax: (510) 642-5018
    Email:
    Web page: http://www.escholarship.org/repec/iber_econ/
    More information through EDIRC

    Related research

    Keywords: adoption; Internet banking; diffusion; consumer banking channels; control function;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Timothy H. Hannan & John M. McDowell, 1984. "The Determinants of Technology Adoption: The Case of the Banking Firm," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 328-335, Autumn.
    2. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
    3. Austan Goolsbee, 2000. "In A World Without Borders: The Impact Of Taxes On Internet Commerce," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 561-576, May.
    4. Goolsbee, Austan, 2001. "Competition in the Computer Industry: Online versus Retail," Journal of Industrial Economics, Wiley Blackwell, vol. 49(4), pages 487-99, December.
    5. Oecd, 1998. "Electronic Commerce: Prices and Consumer Issues for Three Products: Books, Compact Discs and Software," OECD Digital Economy Papers 32, OECD Publishing.
    6. Caselli, Francesco & Coleman II, Wilbur John, 2001. "Cross-Country Technology Diffusion: The Case of Computers," CEPR Discussion Papers 2744, C.E.P.R. Discussion Papers.
    7. Austan Goolsbee & Amil Petrin, 2001. "The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable Television," NBER Working Papers 8317, National Bureau of Economic Research, Inc.
    8. Richard J. Sullivan, 2000. "How has the adoption of Internet banking affected performance and risk in banks?," Financial Industry Perspectives, Federal Reserve Bank of Kansas City, issue Dec, pages 1-16.
    9. Amil Petrin & Kenneth Train, 2003. "Omitted Product Attributes in Discrete Choice Models," NBER Working Papers 9452, National Bureau of Economic Research, Inc.
    10. Michael Smith & Erik Brynjolfsson, 1999. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Computing in Economics and Finance 1999 1022, Society for Computational Economics.
    11. Jeffrey R. Brown & Austan Goolsbee, 2002. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 481-507, June.
    12. Rosenberg, Nathan, 1972. "Factors affecting the diffusion of technology," Explorations in Economic History, Elsevier, vol. 10(1), pages 3-33.
    13. Garth Saloner & Andrea Shepard, 1995. "Adoption of Technologies with Network Effects: An Empirical Examination of the Adoption of Teller Machines," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 479-501, Autumn.
    14. Karen Clay & Ramayya Krishnan & Eric Wolff, 2001. "Prices and Price Dispersion on the Web: Evidence from the Online Book Industry," NBER Working Papers 8271, National Bureau of Economic Research, Inc.
    15. Aviv Nevo, 1998. "A Research Assistant's Guide to Random Coefficients Discrete Choice Models of Demand," NBER Technical Working Papers 0221, National Bureau of Economic Research, Inc.
    16. Morton, Fiona Scott & Zettelmeyer, Florian & Silva-Risso, Jorge, 2001. "Internet Car Retailing," Journal of Industrial Economics, Wiley Blackwell, vol. 49(4), pages 501-19, December.
    17. Fiona Scott Morton & Florian Zettelmeyer & Jorge Silva-Risso, 2001. "Internet Car Retailing," NBER Chapters, in: E-commerce, pages 501-519 National Bureau of Economic Research, Inc.
    18. Hannan, Timothy H & McDowell, John M, 1984. "Market Concentration and the Diffusion of New Technology in the Banking Industry," The Review of Economics and Statistics, MIT Press, vol. 66(4), pages 686-91, November.
    19. J. Miguel Villas-Boas & Russell S. Winer, 1999. "Endogeneity in Brand Choice Models," Management Science, INFORMS, vol. 45(10), pages 1324-1338, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Robert Clark & Jason Allen & Jean-Francois Houde, 2008. "Market Structure and the diffusion of electronic banking," 2008 Meeting Papers 1015, Society for Economic Dynamics.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:cdl:econwp:qt2bt1d76s. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.