Innovation in the Retail Banking Industry: The Diffusion of Credit Scoring

by: Marcello Bofondi, Francesca Lotti

Review of Industrial Organization, Vol. 28, No. 4. (23 June 2006), pp. 343-358.

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Abstract

Abstract We study technology diffusion in the retail banking industry. Our contribution to the empirical literature is twofold: Firstly, we explore technology diffusion in the financial sector, whose relevance has often been neglected; secondly we focus on credit scoring adoption, a relevant process innovation still under-explored. Estimating a set of duration models, we analyze the patterns of diffusion of this technology among Italian banks. We find that credit scoring is firstly introduced by large banks with broad branch networks, which can fully exploit scale economies. We present robust evidence that banks with large market shares operating in more concentrated markets are early adopters, providing a direct support of the Schumpeterian hypothesis that market power enhances innovation.

@article{citeulike:2594170, abstract = {Abstract\ \ We study technology diffusion in the retail banking industry. Our contribution to the empirical literature is twofold: Firstly, we explore technology diffusion in the financial sector, whose relevance has often been neglected; secondly we focus on credit scoring adoption, a relevant process innovation still under-explored. Estimating a set of duration models, we analyze the patterns of diffusion of this technology among Italian banks. We find that credit scoring is firstly introduced by large banks with broad branch networks, which can fully exploit scale economies. We present robust evidence that banks with large market shares operating in more concentrated markets are early adopters, providing a direct support of the Schumpeterian hypothesis that market power enhances innovation.}, author = {Bofondi, Marcello and Lotti, Francesca }, citeulike-article-id = {2594170}, doi = {http://dx.doi.org/10.1007/s11151-006-9101-0}, journal = {Review of Industrial Organization}, keywords = {fis}, month = {June}, number = {4}, pages = {343--358}, posted-at = {2008-03-26 13:26:48}, priority = {2}, title = {Innovation in the Retail Banking Industry: The Diffusion of Credit Scoring}, url = {http://dx.doi.org/10.1007/s11151-006-9101-0}, volume = {28}, year = {2006} }

RIS record

TY - JOUR ID - citeulike:2594170 L3 - citeulike-article-id:2594170 TI - Innovation in the Retail Banking Industry: The Diffusion of Credit Scoring JF - Review of Industrial Organization VL - 28 IS - 4 SP - 343 EP - 358 N2 - Abstract  We study technology diffusion in the retail banking industry. Our contribution to the empirical literature is twofold: Firstly, we explore technology diffusion in the financial sector, whose relevance has often been neglected; secondly we focus on credit scoring adoption, a relevant process innovation still under-explored. Estimating a set of duration models, we analyze the patterns of diffusion of this technology among Italian banks. We find that credit scoring is firstly introduced by large banks with broad branch networks, which can fully exploit scale economies. We present robust evidence that banks with large market shares operating in more concentrated markets are early adopters, providing a direct support of the Schumpeterian hypothesis that market power enhances innovation. KW - fis AU - Bofondi, Marcello AU - Lotti, Francesca PY - 2006/06/23/ UR - http://dx.doi.org/10.1007/s11151-006-9101-0 ER -

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