From clicks to profits: how internet banking adoption drives Swedish bank profitability across different age groups

Purpose This paper aims to understand the impact of the adoption of Internet banking (INB) on banks' profitability. It further investigates this relationship among different age groups of customers. Design/methodology/approach A large panel data set of 19 commercial banks in Sweden over the period of 2007–2022 is used, and both static models (ordinary least squares (OLS), fixed effect (FE)) and a dynamic model (generalized method of moments (GMM)) are applied to deal with potential concerns of unobserved heterogeneity and endogeneity. Findings The analysis of the data reveals that the adoption of INB is positively related to banks' profitability, but the magnitude of this relationship depends on the age of the customers. In particular, the effect is most pronounced for middle-aged and older customers (45–74 years old), which is inconsistent with the common assumption that young, digitally savvy customers are the main drivers of digital value in banking. Practical implications This research contributes to understanding the role of age in the digitalization–profitability link, which is relevant for bank managers and policymakers. These results imply that targeting digital services at middle-aged and older customers may be more likely to benefit banks' profitability. Additionally, policymakers can develop initiatives to facilitate digital inclusion among older age groups. Originality/value The paper extends previous research on the link between INB adoption and banks' profitability in one of the most digitalized societies in the world. It particularly explores the less investigated aspect of generational differences in INB adoption and its impact on bank profitability. To the best of our knowledge, this is also the first study within the Swedish context to investigate generational differences in INB adoption and its impact on banks' profitability.