DOCTORAL THESIS ABSTRACT

Alexandre Momparler Pechuan

THE DEVELOPMENT OF ELECTRONIC BANKING IN SPAIN.
A COMPARATIVE ANALYSIS OF INTERNET-PRIMARY BANKS AND BRANCHING BANKS IN SPAIN AND THE UNITED STATES

According to most data sources (AETIC (2006), CMT (2006) and ASIMELEC (2006), amongst others), the financial industry is the main consumer of information and communication technologies in Spain. These sources also anticipate the financial industry’s leading role as a technology user in forthcoming years while driving factors such as the expansion of Internet will transform and shape those business models with a strong market positioning as service providers (Castells, 2003). Given the banking industry’s central role as a provider of financial services without physical exchange, the development of Internet has a great impact on the industry’s business model, especially on the cost structure and the profitability of financial institutions. Thus, banks cannot stand passively before Internet-driven changes in the industry and society. Instead, financial institutions need to apply proactive planning, a basic point in the construction of a model to formalize a theoretical body that defines key concepts in facilitating its successful implementation.

The present study investigates the actual and potential impact of the emerging Internet-primary banking segment on the Spanish banking industry. This investigation comprises five parts. We start with an initial approach that analyzes and defines the general business environment for Spanish financial institutions. We describe the main characteristics and the structure of the Spanish financial system as well as studying thoroughly the efficiency of the Spanish banking industry through both domestic and international comparative analysis of key determinants of financial performance: margins, profitability and size. This is followed by an evaluation of the existing relationship between technical progress and productivity, obtaining variability indicators for banking activities, before we examine the specialization of financial services’ production processes and distribution, paying special attention to electronic distribution.

The second part of our research looks at the banking industry’s competitive environment in Spain and its development over the period 2001-2005. This part starts with a conceptual clarification of electronic banking terms, followed by an assessment of the various disintermediation processes the banking industry has gone through, as introduced by Soriano (2000) and Cortés (2003) in relation to the emergence of electronic banking,. Likewise, we analyze the changing characteristics of the traditional branching model and its competitive environment where, according to Ontiveros (2003), Internet has become commonplace. Finally, in view of the data provided by the INE’s survey “Enquesta sobre Equipamiento y Uso de Tecnologías de Información y Comunicación en los Hogares (2006)”, and considering the contributions of Redondo and Crespo (2003), we explore the socio-demographic profile of electronic banking users and the impact of Internet on the industry’s entry barriers.


In the third part of our study we define the financial institutions’ business model before and after Internet’s emergence. In line with the propositions of Simpson (2002), De Young (2005) and Wu (2006), we point out the resultant changes in information technology infrastructure, transactions and services, and we identify both branching and internet-primary bank’s business strategies in accordance with the models proposed by Merryll Lynch (2000) and Barrutia and Echevarria (2001), paying especial attention to the strategy of the leading Institution in Spain’s Internet-primary segment. In this part of our study we also make a case for the foreseeable convergence of the two banking models, branching and Internet-primary, following on the concept of complementariness. This leads us to state hypotheses that would contrast the constructs proposed on value creation through intensive use of technology in the Internet-primary business model and the possible convergence of Internet-primary and branching models. We then proceed to test these hypotheses and, where appropriate, validate them.

In the fourth part, taking into consideration the works of Carbó and López (2004) for the Spanish case, and De Young (2005) for the US case, we perform a comparison of the previously enunciated hypotheses in order to evaluate and propose an Internet-primary business model based on profitability and balance sheet structure criteria relating to branching and Internet-primary financial institutions in Spain and the US. Based on the results obtained from our research we present a model, defined by a summary table, and we perform a general evaluation of the comparisons of hypotheses carried out for the Spanish and US cases.

Finally, we put forward the most relevant conclusions on the topics addressed in this study, and we outline a number of issues that we continue to research.