The Influence of Social Media and Internet Presence on Small, Local Bankss Market Power: New Evidence from an Emerging Economy

Abstract

We study the impact of late adoption of online banking and early presence on social media on the market power of small banks in Poland. We combine publicly available information with two unique, hand-collected datasets on the geo-location of all bank branches and on small banks’ Internet and social media presence. We find that late-adopting banks must forego some of their market power to reach new customers through Internet banking. The size of the necessary market-power sacrifice is smaller when small banks primarily compete against their peers within local banking markets than against larger commercial banks. Additionally, we observe that an early and aggressive embrace of Facebook as a method of communication was beneficial for small local banks in terms of interest income.