Who Offers Internet Banking?

Banking over the Internet has attracted increasing attention over the past several years from bankers and other financial services industry participants, the business press, regulators, and lawmakers, both in the United States and in other countries. In part, this is due to the rapid and significant growth in electronic commerce ("ecommerce"), and the notion that electronic banking and payments will likely advance more or less in tandem with e-commerce. In addition, industry analyses outlining the potential impact of Internet banking on cost savings, revenue growth, and increased customer convenience have also generated considerable interest and speculation about the impact of the Internet on the banking industry. The public policy issues emerging with the development of Internet banking are also generating increased attention from banking regulators and other government officials. To date, however, because there is little systematic information on the nature and scope of Internet banking, much of the analysis of the benefits and impact of Internet banking has been based on anecdotal evidence and conjecture.The main purpose of this article is to help fill significant gaps in existing knowledge about the Internet banking landscape. Using information drawn from a survey of national bank examiners, we present data on the number of national banks offering Internet banking and the products and services being offered. In addition, we project the extent of Internet banking at the beginning of 2001 implied by the survey. We also investigate how national banks offering Internet banking perform relative to other national banks with respect to profitability, cost efficiency, and other characteristics. We separately examine de novo (newly chartered) national banks to investigate the extent to which new entrants are embracing Internet banking technology to a different degree than existing banks