Network Size Of Branches, Technological Progress And Bank Competition

There is a bank-dominated financial system in our country, the banking industry is at the heart of the entire financial system and dominates the resource allocation in the economy of China. The banking industry has promoted the economic growth in a great degree. Whether the banks are efficient or not will have a significant impact on the rate of the entire country’s economic growth. Therefore, the study of banking competition will help to improve the efficiency of the banking industry, performance of the financial system and lead our banking industry to a more healthy and orderly direction.Since the last 80’s, the global financial industry has started a wave of information technology popularization, the technological progress of the banking industry has brought the new financial Service facilities, such as the automated teller machine (ATM) system, the point of sale (POS) system, the electronic cash system, the online banking system and so on. This brings people into the electronic-banking era, which has changed the traditional banking system dramatically. Based on this, it’s necessary for us to research the relationship of the branches, the technological progress and the banking competition.In this paper, starting from the perspective of realistic characteristics of the branches and the technological progress in recent years, we analyze the transition of the competition in banking industry through the objective data and theory analysis. This can help us to know the influence of the technological progress on the competition in banking industry more comprehensively. On the basis of this, we put forward the hypotheses. Considering the existing literatures on influence of the technological progress on the competition in banking industry are more focused on the theoretical analysis, this paper take a further step to quantize the technological progress in banking industry as the popularity of different electronic systems, using the panel data of 8 provinces from 1996 to 2012, we build the empirical models not only from a regional perspective, but also from a period perspective. In order to get the accurate result, there are three methods used to analyze the data, mixed regression, fixed effect model and random effect model. On account of the analysis, it gets two conclusions:(1) The technological progress will have a positive influence on the competition in banking industry and have a strong substitution effect on Traditional counter business which depends on branches, but it can’t substitute Traditional counter business totally, the branches still has an influence on the competition in banking industry.(2) The influence of the technological progress and the branches on the competition in banking industry will be different between different regions. Specifically, in the region where the financial industry is more developed, the popularity of the E-business channel has a very strong substitution effect on traditional counter business channel which depends on branches, the influence of the branches on the competition in banking industry is week, the influence of the technological progress is the important factor; on the other hand, in the region in which the financial industry is less developed, due to the lack of popularity of the E-business channel, the popularity of the E-business channel can hardly substitute the traditional counter business channel which depends on branches, the branches still has a strong influence on the competition in banking industry, but the influence of the technological progress on the competition in banking industry is week.The research conclusions of this paper can provide references for mastering the internal regularities for the banking industry competition against the backdrop of technological progress and provide possible directions for searching for methods to more accurately measure the level of competition for the banking industry.