This paper positions the pure-play internet banking model (PPI) as a hybrid business model that combines features of both relationship and transaction banking. Although in terms of customer orientation PPI banks may partly resemble relationship banks, they lack their comparative advantage in generating borrower-specific information. Instead, the characteristic features of PPI banks are low costs and easy scalability. While the latter may enable PPI banks to quickly capture market share, it may also generate overexposure in risky markets. We present a case study on ING Direct, one of the leading global PPI banks and address the sustainability of the PPI business model by comparing the ING Direct foreign operations. The findings for ING Direct are validated using data for E-Trade Bank. We conclude that managing growth appears to be the prime challenge to PPI banks.

Credit crisis, E-Trade, ING Direct, Internet banking,
Journal of Banking & Finance
Article in press - dd November 2010
Erasmus School of Economics

Arnold, I.J.M, & van Ewijk, S.E. (2011). Can pure play internet banking survive the credit crisis?. Journal of Banking & Finance, 35(4), 783–793. doi:10.1016/j.jbankfin.2010.10.010