Journal Article

The financial performance of pure play Internet banks

Abstract: In theory, banks that conduct all their business over the Internet will have low overhead expenses. If these saving materialize, Internet banks could use them to fuel fast growth while still earning normal profits. This article analyzes a small sample of "pure lay" Internet banks launched during the late 1990s. Compared with young branching banks, these young Internet banks have low physical overhead and grow fast--but they earn low profits due to high labor expenses, low noninterest income, and low core deposits.

Keywords: Internet; Payment systems; Electronic commerce;

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Economic Perspectives

Publication Date: 2001

Volume: 25

Issue: Q I

Pages: 60-78