Working Paper 19-4

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

AUTHORS: Bruce Lyons & Minyan Zhu

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.

CITATION: Lyons, B. & Zhu, M (2019) 'Consumer Uptake of Internet Banking, Endogenous Market Structure and Regional Integration in Europe', CCP Working Paper 19-4

Working Paper 19-4

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