Can Internet Banking Affect Households' Participation in Financial Markets and Financial Awareness?

Abstract

We are in a digital era and more and more banks have begun to offer Internet banking. The availability of this new channel can reduce households' cost of acquiring information and the time spent on financial transactions; therefore, it could also impact on households' decisions to start investing in financial markets. Using an instrumental variable approach, we find that the adoption of Internet banking induces households to participate in financial markets and, in particular, to hold short‐term assets with a low risk/return profile. Over time, the adoption of Internet banking also drives a better understanding of basic financial concepts.