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Is the internet delivery channel changing banks' performance? The case of Spanish banks

Author

Listed:
  • Ignacio Hernando

    (Banco de España)

  • María J. Nieto

    (Banco de España)

Abstract

In spite of the conspicuous use of the Internet as a delivery channel, there is a relative dearth of empirical studies that provide a quantitative analysis of the impact of the Internet on banks´ financial performance. This paper attempts to fill this gap by identifying and estimating the impact of the adoption of a transactional web site on financial performance using a sample of 72 commercial banks operating in Spain over the period 1994-2002. The impact on banks´ performance of transactional web adoption takes time to appear. The adoption of the Internet as a delivery channel involves a gradual reduction in overhead expenses (particularly, staff, marketing and IT). This effect is statistically significant after one and a half years after adoption. The cost reduction translates into an improvement in banks´ profitability, which becomes significant after one and a half years in terms of ROA and after three years in terms of ROE. The paper also concludes that the Internet is being used as a complement to, rather than a substitute for, physical branches.

Suggested Citation

  • Ignacio Hernando & María J. Nieto, 2006. "Is the internet delivery channel changing banks' performance? The case of Spanish banks," Working Papers 0624, Banco de España.
    • Handle: RePEc:bde:wpaper:0624
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    commercial banks; internet banking; profitability; cost and income structure;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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