The Impact of Electronic Payments on Bank Cost Efficiency: Nonparametric Evidence

TitleThe Impact of Electronic Payments on Bank Cost Efficiency: Nonparametric Evidence
Publication TypeWorking Paper
Year of Publication2015
AuthorsG. Ardizzi, F. Crudu, C. Petraglia
Number2015_17
ISBN Number978 88 8467 963 5
KeywordsATM, bank cost efficiency, cross-validation, electronic payments, nonparametric regression, transaction technology
Abstract

This paper presents new evidence on the assessment of banks’ cost efficiency gains stemming from ICT adoption. With respect to the existing literature we introduce two novelties. First, a measure of banking operating costs is explained in terms of a commonly used measure of IT innovation (the relative diffusion of ATMs) and a new variable defined as automated payment transactions. Second, the results obtained via standard parametric estimation methods are compared with those obtained via nonparametric estimation techniques. Using an original dataset of Italian banks or banks operating in Italy observed in the period 2006-2010, we do not find clear cost efficiency enhancing effects due to ATMs diffusion. On the other hand, the diffusion of electronic payments shows a significant effect in terms of cost inefficiency reduction.

Citation Key6550
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