Do European Primarily Internet Banks Show Scale and Experience Efficiencies
By Javier Delgado, I. Hernando, María Jesús Nieto. 2007
118 citations recorded by the source corpus.
Empirical evidence shows that Internet banks worldwide have underperformed newly chartered traditional banks mainly because of their higher overhead costs. European banks have not been an exception in this regard. This paper analyses, for the first time in Europe, whether this is a temporary phenomenon and whether Internet banks may generate scale economies in excess of those available to traditional banks. Also do they (and their customers) accumulate experience with this new business model, allowing them to perform as well or even better than their peers, the traditional banks? To this end, we have generally followed the same analytical framework and methodology used by DeYoung (2001, 2002, 2005) for Internet banks in the USA although the limitations in the availability of data, as well as the existence of different regulatory frameworks and market conditions, particularly in the retail segment, in the 15 European Union countries have required some modifications to the methodology. The empirical analysis confirms that, as is the case for US banks, European Internet banks show technologically based scale economies, while no conclusive evidence exists of technology based learning economies. As Internet banks get larger, the profitability gap with traditional banks shrinks. To the extent that Internet banks are profitable, European authorities may encourage a larger number of consumers to use this delivery channel, by tackling consumers security concerns. This would allow Internet banks to capture more of the potential scale efficiencies implied in our estimations.
Subfields: Finance, Media Technology, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/3a6ac81d43e92e15bb9a5aba7400a075dc670425
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Citations in the corpus
- Financial Innovation: The Bright and the Dark Sides (2016, unknown): “Delgado et al., 2007, DeYoung, 2001a, 2001b, and 2005). More recently, Laeven, Levine and Michalopoulos (2011) explore the relationship between the introduction of private credit bureaus and economic growth and show that this specific financial innovation results in faster convergence of countries t”
- Is the Internet delivery channel changing banks’ performance? The case of Spanish banks (2006, background): “Thus, for example, primarily Internet banks distribute insurance and securities as well as banking products, but not all the products they distribute are produced by their group [Delgado and Nieto (2004)].”