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Strategic Online-Banking Adoption

In this paper we study the determinants of banks' decision to adopt a transactional web-site for their customers. Using a panel of commercial banks in the United States for the period 2003- 2006, we show that although bank-specific characteristics are important determinants of banks' adoption decisions, competition also plays a prominent role. The extent of competition is related to the geographical overlap of banks in different markets and their relative market share in terms of deposits. In particular, banks adopt earlier in markets where their competitors have already adopted. In order to construct the different local markets, this paper is one of the first that makes use of the geographic market definitions delimited by the Cassidi R Database compiled at the Federal Reserve Bank of St. Louis.

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