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Strategic Online-Banking Adoption

In this paper we study the determinants of banks’ decision to adopt a transactional website for their customers. Using a panel of commercial banks in the United States for the period 2003-2006, we show that although bank-specific characteristics are important determinants of banks’ adoption decisions, competition also plays a prominent role. The extent of competition is related to the geographical overlap of banks in different markets and their relative market share in terms of deposits. In more competitive markets banks are more likely to adopt earlier. Even more importantly, banks adopt earlier in markets where their competitors have already adopted. In order to construct the different local markets, this paper is one of the first that makes use of the geographic market definitions delimited by the Cassidi® Database compiled by the Federal Reserve Bank of St. Louis.

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Paper provided by CEMFI in its series Working Papers with number wp2008_0813.

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Date of creation: Sep 2008
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Handle: RePEc:cmf:wpaper:wp2008_0813
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  1. Jalal Akhavein & W. Scott Frame & Lawrence J. White, 2001. "The diffusion of financial innovations: an examination of the adoption of small business credit scoring by large banking organizations," Working Paper 2001-9, Federal Reserve Bank of Atlanta.
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  12. Gautam Gowrisankaran & Joanna Stavins, 2004. "Network Externalities and Technology Adoption: Lessons from Electronic Payments," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 260-276, Summer.
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