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The Effect of New Technology in Payment Services on Banks' Intermediation

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Author Info
Kjersti-Gro Lindquist () (Central Bank of Norway)
Abstract

In many countries, payment services in banking have shifted from paper-based giro and check payments to electronic giro and debit card payments. This paper analyses the effect of this change in payment technology within a multiple-output framework using Norwegian bank level panel data. The dual approach with four variable inputs is applied, and the general model includes random coefficients to capture heterogeneity in the production technology across banks. The results show that the move towards electronic payment services has (i) decreased average costs, (ii) increased the economies of scale in the production of deposits more than in the production of loans, and (iii) affected input demand asymmetric. The input ratio between labour and both physical capital and materials have decreased.

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Publisher Info
Paper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number B3-2.

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Date of creation: Mar 2002
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Handle: RePEc:cpd:pd2002:b3-2

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Related research
Keywords: Banking industry; Electronic payments; Technical change; Panel data;

Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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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.:
  1. Humphrey, David B & Kim, Moshe & Vale, Bent, 2001. "Realizing the Gains from Electronic Payments: Costs, Pricing, and Payment Choice," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 216-34, May.
    Other versions:
  2. Caves, Douglas W & Christensen, Laurits R & Tretheway, Michael W, 1980. "Flexible Cost Functions for Multiproduct Firms," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 477-81, August. [Downloadable!] (restricted)
  3. Allen N. Berger & Gerald A. Hanweck & David B. Humphrey, 1986. "Competitive viability in banking: scale, scope, and product mix economies," Research Papers in Banking and Financial Economics 82, Board of Governors of the Federal Reserve System (U.S.).
    Other versions:
  4. Erik Biørn, Kjersti-Gro Lindquist and, 1998. "Random Coefficients and Unbalanced Panels: An Application on Data from Norwegian Chemical Plants," Discussion Papers 235, Research Department of Statistics Norway. [Downloadable!]
  5. Hancock, Diana, 1985. "The Financial Firm: Production with Monetary and Nonmonetary Goods," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 859-80, October. [Downloadable!] (restricted)
  6. Sherrill Shaffer, 1997. "Functional forms and declining average costs," Working Papers 95-13/R, Federal Reserve Bank of Philadelphia.
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  7. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February. [Downloadable!] (restricted)
  8. Erik Biørn, Kjersti-Gro Lindquist and Terje Skjerpen, 2000. "Heterogeneity in Returns to Scale: A Random Coefficient Analysis with Unbalanced Panel Data," Discussion Papers 292, Research Department of Statistics Norway. [Downloadable!]
  9. Vesala, J., 2000. "Technological Transformation and Retail Banking Competition: Implications and Measurement," Bank of Finland - Studies in Economics and Finance e20, Bank of Finland. Research Department..
  10. Kirstin E. Wells, 1996. "Are checks overused?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-12. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Tanai Khiaonarong, 2004. "Payment systems efficiency, policy approaches, and the role of the central bank," Finance 0405004, EconWPA. [Downloadable!]
  2. Khiaonarong, Tanai, 2003. "Payment systems efficiency, policy approaches, and the role of the central bank," Research Discussion Papers 1/2003, Bank of Finland. [Downloadable!]
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This page was last updated on 2009-11-27.


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