Security First Network Bank: A Case Study of an Internet Pioneer

The US banking industry has gone through a decade of mergers and consolidations where the universal view appears to be that achieving larger scale is the only means for survival among the megabanks of the nation and the world. However, one of the smallest banks in the nation, Security First Network Bank, has shaken up traditional bankers by introducing branchless banking via the internet. The implications of widespread internet banking for the industry are still unclear for the future of the industry structure, but it is clear that the largest banks in the industry are watching closely to see how the internet and other forms of electronic commerce will affect banking services, profitability, and economics of scale in the industry. The advent of Internet banking could lead to radical shifts in economies of scale in the industry, as well leading to a new set of critical success factors for future banks that may be quite different from the requirements of succeeding in the current environment. This case study, examining a first mover in this new form of banking, raises issues that are important for both academics and practitioners to examine in greater depth through additional research. Although this single case study is, by design, unable to support or refute the research hypotheses suggested in this paper, it does provide important insights regarding the potential for electronic commerce to dramatically alter the structure of the banking industry. In addition to highlighting important issues for researchers to consider in examining the potential impact of the internet on the banking and financial services industries, this case study may also be useful for academics in teaching students about the potential for this technology to transform industry structures.