"E-Push or e-Pull? Laggards and First-Movers in European On-Line Banking

While a strategic imperative for financial institutions, major differences currently exist among banks' ability to convert their customers to using the internet. In addition, not a lot is known as to what drives those differences, although one can easily hypothesize that on-line banking adoption must be due to a combination of demand (“pull”) and firm (“push”) factors. This paper presents a statistical appraisal of the determinants of on-line customer penetration for a cross-sectional sample of the major incumbent banks in Western Europe for the combination of the yeas 1988 to 2000. “Pull" factors play a large role in explaining customer conversion to internet banking, yet bank-specific factors (or "push" factors) are not marginal. Among others, banks with traditionally high costeffectiveness and which already offer wide private ATM coverage for their customers are also the ones which have already started to migrate a larger proportion of their customers base on-line. Interestingly, among all "push" factors analyzed, cost-effectiveness emerges as the largest leverage effect on customer conversion. Finally, a cluster analysis supplements the regression results along the axes of "pull" and "push", and identifies a set of early movers and laggard among the banks in our sample— Generally speaking, those first-movers already exhibit stronger off-line profitability than laggards, which may indicate that the on-line marketplace may reproduce performance off-line (i.e., currently successful banks have nothing to fear from aggressive start-ups). 1 This paper is based on a research program launched by the Digital Economy Lab of McKinsey &Company. The author thanks his DEL colleagues (Michael Zeisser, Byron Auguste, Driek Desmet, Marc Singer and Jurgen Wunram) for their support in developing this article. The article has also significantly improved based on comments by a referee.