ABSTRACT
Of the numerous technical changes in banking, two stand out as having a large impact on operating costs. These are the expanded use of automatic teller machines (ATMs) to supplement and replace expensive branch offices in delivering an important subset of depositor services and the concurrent substitution of lower cost electronic payments for paper-based transactions. Both of these newer banking technologies intensively use computers and telecommunication facilities and have benefited from cost reductions and efficiency improvements in these important inputs. Our purpose is to quantify the overall effect these newer banking technologies in service delivery and payment method have had on banking costs. We also illustrate the portion of the overall cost change attributed to expanded ATM use versus the shift to electronic payments. This is implemented using a statistical model relating operating costs to certain physical characteristics of service delivery and payment levels and mix for Spanish savings and commercial banks over 1992-2000.
