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Internet banking: an exploration in technology diffusion and impact

  • Richard Sullivan
  • Zhu Wang

This paper studies the diffusion and impact of a cost-saving technological innovation—Internet banking. Our theory characterizes the process through which the innovation is adopted sequentially by large and small banks, and how the adoption affects bank size distribution. Applying the theory to an empirical study of Internet banking diffusion among banks across 50 U.S. states, we examine the technological, economic and institutional factors governing the process. The empirical findings allow us to disentangle the interrelationship between Internet banking adoption and change in average bank size, and explain the variation in diffusion rates across geographic regions.

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Paper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 13-10.

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Date of creation: 2013
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Handle: RePEc:fip:fedrwp:13-10
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  1. Allen N. Berger & Loretta J. Mester, 2001. "Explaining the Dramatic Changes in Performance of U.S. Banks: Technological Change, Deregulation and Dynamic Changes in Competition," Center for Financial Institutions Working Papers 01-22, Wharton School Center for Financial Institutions, University of Pennsylvania.
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  18. Zhu Wang, 2008. "Income Distribution, Market Size and the Evolution of Industry," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 542-565, July.
  19. 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.
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