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Internet banking: an exploration in technology diffusion and impact

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  • Richard Sullivan
  • Zhu Wang

Abstract

This paper studies the diffusion and impact of a cost-saving technological innovation—Internet banking. Our theory characterizes the process through which the innovation is adopted sequentially by large and small banks, and how the adoption affects bank size distribution. Applying the theory to an empirical study of Internet banking diffusion among banks across 50 U.S. states, we examine the technological, economic and institutional factors governing the process. The empirical findings allow us to disentangle the interrelationship between Internet banking adoption and change in average bank size, and explain the variation in diffusion rates across geographic regions.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 13-10.

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Date of creation: 2013
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Handle: RePEc:fip:fedrwp:13-10

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  1. Kevin J. Stiroh, 2002. "Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say?," American Economic Review, American Economic Association, vol. 92(5), pages 1559-1576, December.
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  18. Richard Sullivan, 2004. "Payment services and the evolution of Internet banking," Payments System Research Briefing, Federal Reserve Bank of Kansas City, issue Aug.
  19. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
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Citations

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Cited by:
  1. Hudson, John, 2012. "Internet Banking and the Marginal Internet User," Department of Economics Working Papers 32980, University of Bath, Department of Economics.
  2. James McAndrews & Zhu Wang, 2007. "Microfoundations of Two-sided Markets: The Payment Card Example," DNB Working Papers 128, Netherlands Central Bank, Research Department.
  3. Zhu Wang, 2007. "Technological Innovation and Market Turbulence: The Dot-com Experience," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(1), pages 78-105, January.
  4. David VanHoose, 2009. "Internet Banking," NFI Policy Briefs 2009-PB-12, Indiana State University, Scott College of Business, Networks Financial Institute.
  5. John Goddard & Donal McKillop & John Wilson, 2009. "Which Credit Unions are Acquired?," Journal of Financial Services Research, Springer, vol. 36(2), pages 231-252, December.
  6. Sullivan, Richard J., 2013. "The impact of debit card regulation on checking account fees," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 59-93.
  7. Zhu Wang, 2008. "Income Distribution, Market Size and the Evolution of Industry," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 542-565, July.
  8. Zhu Wang, 2006. "Technology Innovation and Market Turbulence: A Dotcom Example," 2006 Meeting Papers 508, Society for Economic Dynamics.
  9. James McAndrews & Zhu Wang, 2012. "The economics of two-sided payment card markets: pricing, adoption and usage," Working Paper 12-06, Federal Reserve Bank of Richmond.
  10. Gerard Llobet & Rubén Hernández-Murillo & Roberto Fuentes, 2008. "Strategic Online-Banking Adoption," Working Papers wp2008_0813, CEMFI.
  11. Orviska, Marta & Hudson, John, 2009. "Dividing or uniting Europe? Internet usage in the EU," Information Economics and Policy, Elsevier, vol. 21(4), pages 279-290, November.

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