The Internet, Bank Structure and Small Business Lending
The advent of the Internet has opened many opportunities for bankers to access new customers, increase convenience and expand product ranges in many markets, including that of small businesses. Yet anecdotal evidence reveals that smaller banks are reluctant to employ Internet technology in the small business market for fear of damaging the customer relationship developed through personal contact. These smaller, more simply structured banks tend to specialize in small business lending, possessing a comparative advantage in that market (Craig and Hardee, 2001). This is particularly so in relationship driven credits where personal knowledge of the borrower is paramount over financial ratios produced through credit scoring models (Berger and Udell, 1995, 1994). However, with technological advances, large banks have captured a greater share of the small business loan market (Ely and Robinson, 2001; Mester, 1997). Furthermore, large complex financial institutions have made greater inroads in establishing an Internet presence on the World Wide Web and have the most ambitious online banking agendas (Furst, Lang and Nolle, 2000). Within the financial services industry consolidations are ongoing and information technologies rapidly improve. The result is much larger, complex banks participating more in small business lending (SBL) relative to the fewer small, simply structured onesâ€”in contrast to what older evidence reveals (Ely and Robinson, 2001). Consequently, the purpose of this paper is to determine if, with advanced technologies along with the changing face of the industry, bank structure continues to impact SBL; and if specifically Internet banking â€œlevels the playing fieldâ€ in that market. We define an Internet bank as any commercial bank maintaining a World Wide Web site on which banking transactions may be conducted electronically. These range from basic Internet services such as account inquiries to total financial management of a customer?s assets.
Volume (Year): 7 (2002)
Issue (Month): 1 (Spring)
|Contact details of provider:|| Postal: 24255 Pacific Coast Hwy, Malibu CA|
Web page: http://bschool.pepperdine.edu/jef
More information through EDIRC
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.:
- Richard J. Sullivan, 2000. "How has the adoption of Internet banking affected performance and risk in banks?," Financial Industry Perspectives, Federal Reserve Bank of Kansas City, issue Dec, pages 1-16.
- Lawrence G. Goldberg & Lawrence J. White, 1997.
"De Novo Banks and Lending to Small Businesses: An Empirical Analysis,"
New York University, Leonard N. Stern School Finance Department Working Paper Seires
98-039, New York University, Leonard N. Stern School of Business-.
- Goldberg, Lawrence G. & White, Lawrence J., 1998. "De novo banks and lending to small businesses: An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 851-867, August.
- Loretta J. Mester, 1997. "What's the point of credit scoring?," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 3-16.
- Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June.
- Strahan, Philip E. & Weston, James P., 1998. "Small business lending and the changing structure of the banking industry1," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 821-845, August.
When requesting a correction, please mention this item's handle: RePEc:pep:journl:v:7:y:2002:i:1:p:77-98. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Craig Everett)
If references are entirely missing, you can add them using this form.