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High-Speed Internet, Financial Technology, and Banking

Author

Listed:
  • Angelo D’Andrea

    (Financial Stability Directorate, Bank of Italy, 00184 Rome, Italy)

  • Nicola Limodio

    (Department of Finance, Bocconi University, 20136 Milan, Italy; Baffi Centre for Applied Research on International Markets, Banking, Finance and Regulation (BAFFI CAREFIN), Bocconi University, 20136 Milan, Italy; Center for Economic Policy Research, Bocconi University, 20136 Milan, Italy)

Abstract

Exploiting the staggered arrival of fiber-optic submarine cables, we show that high-speed internet promotes the role of banks and credit in Africa. Variation within country and across multicountry bank networks indicates that high-speed internet induced a 22% expansion in credit supply. We investigate the role of plummeting telecommunication costs in promoting the bank adoption of new financial technologies and study a specific technology used in the interbank market, the real-time gross settlement system (RTGS). We find that upon connecting to high-speed internet, banks adopt the RTGS more extensively, reduce inside liquidity, and increase interbank transactions and lending. We also observe that high-speed internet particularly strengthens firms in countries with weak preexisting interbank markets.

Suggested Citation

  • Angelo D’Andrea & Nicola Limodio, 2024. "High-Speed Internet, Financial Technology, and Banking," Management Science, INFORMS, vol. 70(2), pages 773-798, February.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:2:p:773-798
    DOI: 10.1287/mnsc.2023.4703
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