High-Speed Internet, Financial Technology, and Banking

Abstract

Exploiting the staggered arrival of fiber-optic submarine cables, we show that high-speed internet promotes the role of banks and credit in Africa. Variation within country and across multicountry bank networks indicates that high-speed internet induced a 22% expansion in credit supply. We investigate the role of plummeting telecommunication costs in promoting the bank adoption of new financial technologies and study a specific technology used in the interbank market, the real-time gross settlement system (RTGS). We find that upon connecting to high-speed internet, banks adopt the RTGS more extensively, reduce inside liquidity, and increase interbank transactions and lending. We also observe that high-speed internet particularly strengthens firms in countries with weak preexisting interbank markets.