"Attack or convert?": early evidence from European on-line banking

Why are so many on-line banking ventures--start-ups and incumbents alike--foundering? An industry which can theoretically conduct such a high proportion of its transactions electronically would seem well suited to a rapid move on-line. Yet, the rate at which customers around the world are adopting Internet banking remains relatively low; and furthermore the capability to convert or acquire customers on-line varies enormously among banks. This paper attempts to analyze and compare possible drivers of customer acquisition and conversion for European on-line banking at the light of various theories of bank innovations. The econometric model is consistent with "pull" market features playing a significant role, but only for customer conversion. In contrast, bank-specific factors are largely the driver for on-line customer acquisition strategy, especially organizational link to on-line activities and bank size. All in all, this paper confirms that, consistent with the strategic management literature, an "attacker" versus "conversion" strategy obeys significantly different paths, but also that some banks are notably better in executing their strategy than others, on-line.