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The Changing Geography of Banking and Finance pp 109–130Cite as

Distance and Internet Banking

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Abstract

Internet-related possibilities might reduce the importance of distance for economic activity. By using data from the Survey on Household Income and Wealth (SHIW) of the Bank of Italy, this chapter investigates the validity of this assertion for Internet banking. It shows that there is no support for the argument that isolated consumers use e-banking more intensively than their less-isolated counterparts. It also highlights that, compared to less isolated clients, geographically remote clients are more frequently supplied with a loan by their own bank and evaluate personal acquaintances as an important factor more intensively. Overall, these findings support the relevance of soft information in lending practices to families and family businesses

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Notes

  1. 1.

    Note that the IKD hypothesis has been variously labeled in the literature. Examples are the global village hypothesis, the death of distance hypothesis, the death of cities hypothesis, and the Internet-cities substitution hypothesis.

  2. 2.

    As noted by the ECB (1999, p. 14): “Internet banking is expected to have the highest future growth potential (…) it will expand considerably within the next two to three years.”

  3. 3.

    Interestingly, Kahn (2004) finds that the type of financial account that a consumer has with a bank is a significant predictor of online banking usage (see also Brevoort and Wolken 2009: Chapter 3, this Volume, and Section. 6.2 below).

  4. 4.

    The effect of information technology on financial service competition is analyzed in Hauswald and Marquez (2003).

  5. 5.

    On the north-south divide in Italian ITC endowment, see Bonaccorsi et al. (2006).

  6. 6.

    SHIW micro-data are publicly available at www.bancaditalia.it.

  7. 7.

    The special sections are considered quite demanding for the respondents and very expensive for the Bank of Italy. This explains why sometimes the questions included in a special section are posed only to a subset of the respondents. For instance, only 3,009 households are asked to respond to the Internet navigation question.

  8. 8.

    Our coefficient estimates are not sensitive, however, to weighting or not weighting the data.

  9. 9.

    I also replaced the dummy for the presence of children in the household with a variable indicating the number of children in the household, with no modification of the results.

  10. 10.

    Only 2,931 households (out of 3,009) provide this information.

  11. 11.

    A similar procedure is followed by Charlot and Duranton (2004).

  12. 12.

    As for the reasons why the IKD hypothesis does not work, our results could be consistent both with the Gaspar and Glaeser (1998) story, according to which the Internet is a complement to cities because it spurs face-to-face interactions, and the Sinai and Waldfogel (2004) argument, whereby the supply of Internet content is biased in favor of urban residents. Unfortunately, our data do not allow us to disentangle the relative merits of the two proposed explanations.

  13. 13.

    As before, controlling for traffic congestion does not modify the results.

  14. 14.

    The question was posed only to households in which the head of household was born in an even numbered year.

  15. 15.

    This result is interesting because, in principle, congestion costs (for instance, longer queuing) could be more significant in larger areas and thus counterbalance the advantage of having a closer bank branch. However, Table 6.6 shows that banking transactions are not slower in cities, and so congestion costs do not seem to be a reason for the failure of IKD hypothesis.

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Acknowledgments

I would like to thank Giorgio Albareto, Guglielmo Barone, Luigi Cannari, and Massimo Omiccioli. I am grateful to Diego Caprara and Christine Stone for their editorial assistance. The usual disclaimers apply.

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  1. Bank of Italy, Research Department, Via Nazionale 91, 00184, Rome, Italy

    Guido de Blasio

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  1. Guido de Blasio
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Correspondence to Guido de Blasio .

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    Appendices

    Appendix: Description of the Dependent Variables

    Table 7
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    Appendix: Description of the City Size Measures and Main Control Variables

    Table 8
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    de Blasio, G. (2009). Distance and Internet Banking. In: Zazzaro, A., Fratianni, M., Alessandrini, P. (eds) The Changing Geography of Banking and Finance. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-98078-2_6

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