Finance Papers

Document Type

Journal Article

Date of this Version

2-2011

Publication Source

Management Science

Volume

57

Issue

2

Start Page

291

Last Page

307

DOI

10.1287/mnsc.1100.1187

Abstract

This paper examines the drivers of adoption of Internet banking and the linkages among adoption drivers and outcomes (product acquisition, service activity, profitability, loyalty). We relate Internet banking adoption to customer demand for banking services, the availability of alternative channels, customers' efficiency in service coproduction (“customer efficiency”), and local Internet banking penetration. We find that customers who have greater transaction demand and higher efficiency, and reside in areas with a greater density of online banking adopters, are faster to adopt online banking after controlling for time, regional, and individual characteristics. Consistent with prior work, we find that customers significantly increase their banking activity, acquire more products, and perform more transactions. These changes in behavior are not associated with short-run increases in customer profitability, but customers who adopt online banking have a lower propensity to leave the bank. Building on these observations we also find that the adoption drivers are linked to the postadoption changes in behavior or profitability. Customers who live in areas with a high branch density or high Internet banking penetration increase their product acquisition and transaction activity more than Internet banking adopters in other regions. Efficient customers and those with high service demand show greater postadoption profitability.

Copyright/Permission Statement

https://doi.org/10.1287/mnsc.1100.1187

Keywords

Internet banking adoption, customer efficiency, network effects

Embargo Date

8-14-2007

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Date Posted: 27 November 2017

This document has been peer reviewed.