Efficiency in banking services: a comparative analysis of Internet-primary and branching banks in the US

This paper investigates the provision of financial services by banks as a two-stage production process involving three different basic activities. The first stage includes service activities, while the second stage comprises both investment-related and risk management activities. Financial services performance is assessed in terms of service efficiency and investment and risk management efficiency for years 2002–2010. The major empirical findings are that the Internet-primary bank is more efficient than most branching banks in deposit-raising activities, but with regard to investment and risk management activities, there are many brick-and-mortar banks that match the online bank performance.