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Can pure play internet banking survive the credit crisis?

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  • Arnold, Ivo J.M.
  • van Ewijk, Saskia E.

Abstract

This paper positions the pure-play internet banking model (PPI) as a hybrid business model that combines features of both relationship and transaction banking. Although in terms of customer orientation PPI banks may partly resemble relationship banks, they lack their comparative advantage in generating borrower-specific information. Instead, the characteristic features of PPI banks are low costs and easy scalability. While the latter may enable PPI banks to quickly capture market share, it may also generate overexposure in risky markets. We present a case study on ING Direct, one of the leading global PPI banks and address the sustainability of the PPI business model by comparing the ING Direct foreign operations. The findings for ING Direct are validated using data for E-Trade Bank. We conclude that managing growth appears to be the prime challenge to PPI banks.

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  • Arnold, Ivo J.M. & van Ewijk, Saskia E., 2011. "Can pure play internet banking survive the credit crisis?," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 783-793, April.
    • Handle: RePEc:eee:jbfina:v:35:y:2011:i:4:p:783-793
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    Cited by:

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    2. Elisabeta Pana & Sascha Vitzthum & David Willis, 2015. "The impact of internet-based services on credit unions: a propensity score matching approach," Review of Quantitative Finance and Accounting, Springer, vol. 44(2), pages 329-352, February.
    3. Dong, Jichang & Yin, Lijun & Liu, Xiaoting & Hu, Meiting & Li, Xiuting & Liu, Lei, 2020. "Impact of internet finance on the performance of commercial banks in China," International Review of Financial Analysis, Elsevier, vol. 72(C).
    4. Chen, Kuan-Chieh & Huang, Kuo-Jui & Huang, Shian-Chang, 2024. "Production efficiency of internet-only banks and conventional banks: Evidence from China and Japan," International Review of Economics & Finance, Elsevier, vol. 94(C).
    5. Francesco Fasano & Tiziana Rocca, 2024. "Does the bank-firm human relationship still matter for SMEs? The game-changing role of digitalization," Small Business Economics, Springer, vol. 62(1), pages 159-178, January.
    6. Paul Cavelaars & Jakob de Haan & Paul Hilbers & Bart Stellinga, 2013. "Challenges for financial sector supervision," DNB Occasional Studies 1106, Netherlands Central Bank, Research Department.
    7. Alexandre Momparler & Francisco Climent & Jose Ballester, 2012. "The impact of scale effects on the prevailing internet-based banking model in the US," Service Business, Springer;Pan-Pacific Business Association, vol. 6(2), pages 177-195, June.
    8. Yu, Jingjing, 2024. "Stabilizing leverage, financial technology innovation, and commercial bank risks: Evidence from China," Economic Modelling, Elsevier, vol. 131(C).
    9. Yi Yang & Shuhe Shi & Jingjing Wu, 2022. "Digital Financial Inclusion to Corporation Value: The Mediating Effect of Ambidextrous Innovation," Sustainability, MDPI, vol. 14(24), pages 1-23, December.
    10. Jian-Hang Wang & Yu-Hsien Wu & Phil Yihsing Yang & Hsiang-Yi Hsu, 2023. "Sustainable Innovation and Firm Performance Driven by FinTech Policies: Moderating Effect of Capital Adequacy Ratio," Sustainability, MDPI, vol. 15(11), pages 1-15, May.
    11. Paul Cavelaars & Joost Passenier, 2012. "Follow the money: what does the literature on banking tell prudential supervisors on bank business models?," DNB Working Papers 336, Netherlands Central Bank, Research Department.
    12. Arnold, Ivo J.M., 2020. "Internet search volumes of UK banks during the crisis: The role of banking structure and business model," Global Finance Journal, Elsevier, vol. 45(C).

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