Electronic Payments and ATMs: Changing Technology and Cost Efficiency in Banking*

Abstract

Two major technical changes in banking are the expanded use of ATMs to deliver depositor services and the shift to electronic payments. Over 1992-2000, these two changes in bank production are estimated to have reduced operating cost by 37%, saving 4.5 billion euros in Spain (0.7% of GDP). As these trends continue, further savings may be realized. These results are robust to using composite, translog, or Fourier functional forms to estimate an output characteristics cost function. Other European countries as well as the U.S. may have experienced similar savings. * Support for this research was provided by the Fundaci\n de las Cajas de Ahorros Confederadas para la Investigaci\n Econ\mica y Social. Corresponding Author: Dave Humphrey, Department of Finance, Florida State University, Tallahassee, FL, USA, 32306-1042; Phone: (850) 644-7899; dhumphr@garnet.acns.fsu.edu

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