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

G. Ardizzi, Federico Crudu () and Carmelo Petraglia

Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia

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.

Keywords: electronic payments; ATM; transaction technology; bank cost efficiency; nonparametric regression; cross-validation (search for similar items in EconPapers)
JEL-codes: C14 C33 G2 L11 L8 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ban, nep-eff, nep-ino and nep-ore
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cns:cnscwp:201517

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