Internet Banking

Abstract

This paper reviews what economists have learned about Internet banking. The paper begins by surveying evidence regarding the fundamental motivations for banks to offer services via the Internet and for their customers to utilize the services. It considers the experience of and future prospects for so-called “pure-play” Internet banks that conduct virtually all dealings with their customers via the Web. The paper next evaluates the current evidence on how Internet banking has affected the performances of traditional banking institutions, with a focus on whether the provision of banking services via the Web has mainly been felt on the revenue or expense side of banks’ income statements. Furthermore, it examines recent concerns about the possibility that deposits raised through Internet channels are potentially more susceptible to sudden withdrawals that could result in runs on banks. The paper concludes by summarizing the main points and considering future directions for research on this topic.

Keywords: Internet Banking, Online Financial Services

JEL Classification: G28