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Consumer Uptake of Internet Banking, Endogenous Market Structure and Regional Integration in Europe

Author

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  • Bruce Lyons

    (School of Economics, University of East Anglia)

  • Minyan Zhu

    (Department of Economics, University of Reading)

Abstract

This paper examines how market structure influences the early introduction and consumer uptake of a digital service that is a convenient alternative to traditional service delivery. Digital provision also has "extended geographic reach" and "lower sunk costs" as compared with bricks-and-mortar service provision. We further examine how these affect market structure. Internet banking provides an important example that also allows us to separate regional integration and national concentration dimensions of market structure. We develop an econometric model of the effects of market structure on the introduction and consumer uptake of internet banking. We estimate using panel data for all EU Member States and find that both concentration and regionalisation bring these forward. Next, we examine how consumer uptake of the digital product then begins to impact on banking market structure. We find a substantial de-concentrating effect in large non-regionalised markets and indirect evidence of integration in previously regionalised markets. This is consistent with internet banking having enhanced competition in both integrated markets and, despite little change in national concentration, also in previously regionalised markets.

Suggested Citation

  • Bruce Lyons & Minyan Zhu, 2019. "Consumer Uptake of Internet Banking, Endogenous Market Structure and Regional Integration in Europe," Economics Discussion Papers em-dp2019-14, Department of Economics, University of Reading.
    • Handle: RePEc:rdg:emxxdp:em-dp2019-14
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    File URL: http://www.reading.ac.uk/web/FILES/economics/emdp201914.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Internet Banking; Digital Markets; Endogenous Market Structure; Market Integration; Consumer Diffusion;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • F15 - International Economics - - Trade - - - Economic Integration
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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