Digital disruption and market structure: The case of internet banking

We provide an econometric study of the adoption of internet banking, a case of a potentially disruptive digital technology which could devalue/replace incumbent legacy. Our aim is to better understand the extent to which it disrupted market structure where incumbents start with a strong customer base. We study both regional integration and national concentration dimensions of market structure in EU member states during the period of 1997-2018. We find that internet banking was initially introduced earlier in more concentrated markets. Although consumer uptake was then slower over time than in less concentrated markets, the initial higher consumer penetration in more concentrated markets was sustained until market maturity. We further find a substantial de-concentrating effect of internet banking, and evidence of integration in previously regionalised markets following uptake.