Market structure and the diffusion of e-commerce: Evidence from the retail banking industry

Arbeitspapier

This paper studies the role that market structure plays in affecting the diffusion of electronic banking. Electronic banking (and electronic commerce more generally) reduces the cost of performing many types of transactions for firms. The full benefits for firms from adoption, however, only accrue once consumers begin to perform a significant share of their transactions online. Since there are learning costs to adopting the new technology firms may try to encourage consumers to go online by affecting the relative quality of the online and offline options. Their ability to do so is a function of market structure. In more competitive markets, reducing the relative attractiveness of the offline option involves the risk of losing customers (or potential customers) to competitors, whereas, this is less of a concern for a more dominant firm. We develop a model of branch-service quality choice with switching costs meant to characterize the trade-off banks face when rationalizing their network between technology penetration and business stealing. The model is solved numerically and we show that the incentive to lower branch-service quality and drive consumers into electronic banking is greater in more concentrated markets and for more dominant banks. We find support for the predictions of the model using a panel of household survey data on electronic payment usage as well as branch location data, which we use to construct measures of branch quality.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Bank of Canada Working Paper ; No. 2008-32

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Household Saving; Personal Finance ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Thema: Financial institutions ; Market structure and pricing ; Finanzsektor ; Privatkundengeschäft ; Bankautomation ; Electronic Banking ; Kanada

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Allen, Jason ; Clark, Robert ; Houde, Jean-François
• Ereignis: Veröffentlichung
• (wer): Bank of Canada
• (wo): Ottawa
• (wann): 2008

Weitere Informationen

• DOI: doi:10.34989/swp-2008-32
• Handle: http://hdl.handle.net/10419/53869
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ