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The long-term effect of digital innovation on bank performance: An empirical study of SWIFT adoption in financial services

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  • Scott, Susan V.
  • Van Reenen, John
  • Zachariadis, Markos

Abstract

We examine the impact on bank performance of the adoption of SWIFT, a network-based technological infrastructure for worldwide interbank telecommunication. We construct a new longitudinal dataset of 6,848 banks in 29 countries in Europe and the Americas with the full history of adoption since SWIFT’s initial operations in 1977. Our results suggest that the adoption of SWIFT (i) has large effects on profitability in the long-term; (ii) is greater for small than for large banks; and (iii) exhibits significant network effects on performance. We use an in-depth field study to better understand the mechanisms underlying the effects on profitability.

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  • Scott, Susan V. & Van Reenen, John & Zachariadis, Markos, 2017. "The long-term effect of digital innovation on bank performance: An empirical study of SWIFT adoption in financial services," LSE Research Online Documents on Economics 83641, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:83641
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    4. Agu, Chinonso .V. & Aguegboh, Ekene .S., 2020. "ICT and Bank Performance in Sub-Saharan Africa: A Dynamic Panel Analysis," MPRA Paper 100355, University Library of Munich, Germany.
    5. Christian Haddad & Lars Hornuf, 2021. "The Impact of Fintech Startups on Financial Institutions' Performance and Default Risk," CESifo Working Paper Series 9050, CESifo.
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    8. Maik Dehnert, 2020. "Sustaining the current or pursuing the new: incumbent digital transformation strategies in the financial service industry," Business Research, Springer;German Academic Association for Business Research, vol. 13(3), pages 1071-1113, November.
    9. Sajna Ibrahim & Michael Obal, 2019. "Investigating The Impact Of Radical Technology Adoption Into The New Product Development Process," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 24(04), pages 1-25, June.
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    More about this item

    Keywords

    Technology adoption; bank performance; financial services; network innovation; SWIFT;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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