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Strategic Online-Banking Adoption

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Author Info
Gerard Llobet () (CEMFI, Centro de Estudios Monetarios y Financieros)
Rubén Hernández-Murillo () (Federal Reserve Bank of St. Louis)
Roberto Fuentes (Farmaindustria)

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Abstract

In this paper we study the determinants of banks’ decision to adopt a transactional website for their customers. Using a panel of commercial banks in the United States for the period 2003-2006, we show that although bank-specific characteristics are important determinants of banks’ adoption decisions, competition also plays a prominent role. The extent of competition is related to the geographical overlap of banks in different markets and their relative market share in terms of deposits. In more competitive markets banks are more likely to adopt earlier. Even more importantly, banks adopt earlier in markets where their competitors have already adopted. In order to construct the different local markets, this paper is one of the first that makes use of the geographic market definitions delimited by the Cassidi® Database compiled by the Federal Reserve Bank of St. Louis.

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Publisher Info
Paper provided by CEMFI in its series Working Papers with number wp2008_0813.

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Date of creation: Sep 2008
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Handle: RePEc:cmf:wpaper:wp2008_0813

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Related research
Keywords: Duration models; technological adoptacion; online banking; competition.;

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Find related papers by JEL classification:
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis

References listed on IDEAS
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  1. Robert DeYoung, 2001. "The financial performance of pure play Internet banks," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 60-78. [Downloadable!]
  2. Zhu Wang, 2006. "Online banking comes of age," TEN, Federal Reserve Bank of Kansas City, issue Win, pages 22-25. [Downloadable!]
  3. Nancy L. Rose & Paul L. Joskow, 1990. "The Diffusion of New Technologies: Evidence from the Electric Utility Industry," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 354-373, Autumn. [Downloadable!] (restricted)
    Other versions:
  4. 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. [Downloadable!] (restricted)
  5. David Nickerson & Richard J. Sullivan, 2003. "Financial innovation, strategic real options and endogenous competition : theory and an application to Internet banking," Payments System Research Working Paper PSR WP 03-01, Federal Reserve Bank of Kansas City. [Downloadable!]
  6. Richard J. Sullivan & Zhu Wang, 2005. "Internet banking: an exploration in technology diffusion and impact," Payments System Research Working Paper PSR WP 05-05, Federal Reserve Bank of Kansas City. [Downloadable!]
  7. repec:bep:eapcon:v:5:y:2006:i:1:p:1420-1420 is not listed on IDEAS
  8. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 129-38, February.
  9. Sharon Oster, 1982. "The Diffusion of Innovation among Steel Firms: The Basic Oxygen Furnace," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 45-56, Spring. [Downloadable!] (restricted)
  10. Chang, Yoonhee Tina, 2003. "Dynamics of Banking Technology Adoption: An Application to Internet Banking," Royal Economic Society Annual Conference 2003 41, Royal Economic Society. [Downloadable!]
    Other versions:
  11. Massoud Karshenas & Paul L. Stoneman, 1993. "Rank, Stock, Order, and Epidemic Effects in the Diffusion of New Process Technologies: An Empirical Model," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 503-528, Winter. [Downloadable!] (restricted)
    Other versions:
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