The Impact of Internet-Banking on Brick and Mortar Branches: The Case of Turkey

C. Onay, E. Ozsoz

Research output: Contribution to journalArticlepeer-review


The increased adoption and infiltration of the Internet has recently redefined the playground for retail banks. Retail banks are now offering their services primarily through their Internet banking branches. The repercussions of this change to “brick and mortar” banks have been studied in the context of developed market economies. In this paper, we contribute to the literature by studying the impact of Internet banking adoption on banks’ deposit collection, lending activities, and performance in an emerging market setting. By using a panel of 18 retail banks that operate in Turkey from 1990–2008, we demonstrate that Internet banking adoption has a positive impact on the level of profits, deposits and loans per branch. As operational activities are now provided via Internet branches, Internet banking facilitates banking activities in branches that require more human input. We also find that Internet banking adoption has a negative impact on bank profitability after 2 years of adoption as Internet banking increases competition and results in lower interest income. Accordingly, Internet banking complements brick and mortar branches.
Original languageEnglish
Pages (from-to)187-204
Number of pages17
JournalJournal of Financial Services Research
Publication statusPublished - 6 Jan 2012


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