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Can pure play internet banking survive the credit crisis?

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  • Arnold, Ivo J.M.
  • van Ewijk, Saskia E.

Abstract

This paper positions the pure-play internet banking model (PPI) as a hybrid business model that combines features of both relationship and transaction banking. Although in terms of customer orientation PPI banks may partly resemble relationship banks, they lack their comparative advantage in generating borrower-specific information. Instead, the characteristic features of PPI banks are low costs and easy scalability. While the latter may enable PPI banks to quickly capture market share, it may also generate overexposure in risky markets. We present a case study on ING Direct, one of the leading global PPI banks and address the sustainability of the PPI business model by comparing the ING Direct foreign operations. The findings for ING Direct are validated using data for E-Trade Bank. We conclude that managing growth appears to be the prime challenge to PPI banks.

Suggested Citation

  • Arnold, Ivo J.M. & van Ewijk, Saskia E., 2011. "Can pure play internet banking survive the credit crisis?," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 783-793, April.
  • Handle: RePEc:eee:jbfina:v:35:y:2011:i:4:p:783-793
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Szopiński, Tomasz Stanisław, 2016. "Factors affecting the adoption of online banking in Poland," Journal of Business Research, Elsevier, vol. 69(11), pages 4763-4768.
    2. Paul Cavelaars & Jakob de Haan & Paul Hilbers & Bart Stellinga, 2013. "Challenges for financial sector supervision," DNB Occasional Studies 1106, Netherlands Central Bank, Research Department.
    3. Alexandre Momparler & Francisco Climent & Jose Ballester, 2012. "The impact of scale effects on the prevailing internet-based banking model in the US," Service Business, Springer;Pan-Pacific Business Association, vol. 6(2), pages 177-195, June.
    4. Paul Cavelaars & Joost Passenier, 2012. "Follow the money: what does the literature on banking tell prudential supervisors on bank business models?," DNB Working Papers 336, Netherlands Central Bank, Research Department.
    5. Elisabeta Pana & Sascha Vitzthum & David Willis, 2015. "The impact of internet-based services on credit unions: a propensity score matching approach," Review of Quantitative Finance and Accounting, Springer, vol. 44(2), pages 329-352, February.

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