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The Long-Term Effect of Digital Innovation on Bank Performance: An Empirical Study of SWIFT Adoption in Financial Services

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  • Susan Scott
  • John Van Reenen
  • Markos Zachariadis

Abstract

We examine the impact on bank performance of the adoption of SWIFT, a network-based technological infrastructure for worldwide interbank telecommunication. We construct a new longitudinal dataset of 6,848 banks in 29 countries in Europe and the Americas with the full history of adoption since SWIFT's initial operations in 1977. Our results suggest that the adoption of SWIFT (i) has large effects on profitability in the long-term; (ii) is greater for small than for large banks; and (iii) exhibits significant network effects on performance. We use an in-depth field study to better understand the mechanisms underlying the effects on profitability.

Suggested Citation

  • Susan Scott & John Van Reenen & Markos Zachariadis, 2010. "The Long-Term Effect of Digital Innovation on Bank Performance: An Empirical Study of SWIFT Adoption in Financial Services," CEP Discussion Papers dp0992, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0992
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    More about this item

    Keywords

    Technology adoption; bank performance; financial services; network innovation; SWIFT;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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