Publications: Internet Banking: Developments and Prospects
by Karen Furst, William W. Lang, and Daniel E. Nolle
Abstract
This paper addresses significant gaps in existing knowledge about the Internet
banking landscape. Using information drawn from a survey of national bank examiners,
we find that while only 20 percent of national banks offered Internet banking in
Q3 1999, these transactional Internet banks accounted for almost 90 percent of
national banking system assets and 84 percent of the total number of small
deposit accounts. All of the largest national banks offered Internet banking,
but only about 7 percent of the smallest banks offered it. Among institutions
offering Internet banking, large banks are more likely than small banks to offer
a broad range of services on the Internet. Matching call report data to the
examiner survey information, we also find that banks in all size categories
offering Internet banking tend to rely less on interest-yielding activities
and deposits than do non-Internet banks, and institutions with Internet
banking outperformed non-Internet banks in terms of profitability.
Excepted from the superior performance of Internet banks versus
non-Internet banks are de novo Internet banks, which were
less profitable and less efficient than non-Internet de novos.
Projections based on banks' plans as of Q3 1999 indicate that 45 percent
of all national banks will be offering Internet banking by the beginning
of 2001. While most of the growth in new Internet banking will be due to
small banks coming online, almost half of all national banks had no plans
to offer Internet banking. Large banks have more aggressive plans to
offer business Internet banking services in the future than small
institutions.
Disclaimer
As with all OCC Working Papers, the opinions expressed in this paper are those of the author alone, and
do not necessarily reflect the views of the Office of the Comptroller of the Currency or the Department of the Treasury.
Any whole or partial reproduction of material in this paper should include the following citation:
Karen Furst, William W. Lang, and Daniel E. Nolle " Internet Banking: Developments
and Prospects," Office of the Comptroller of the Currency, E&PA Working Paper
2000-9, September 2000.
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