Purpose -The purpose of this paper is to examine the impact of online banking intensity on the financial performance of community banks. Design/methodology/approach -This study estimates online banking intensity and bank performance indices using a combination of primary and secondary data. Online banking intensity is specified as a latent construct and estimated using web feature data collected from bank websites. An empirical profit function of a nonstandard Fourier flexible form is estimated using bank's financial data to derive a theoretically consistent performance measure. The actual impact of online banking on performance is measured by regressing the profit efficiency index against a number of correlates including online banking intensity measure. Findings -Study results indicate that the increasing use of internet as an additional channel of marketing banking services has significantly improved the financial performance of community banks. Practical implications -These results show that online banking improves the financial performance and should encourage community banks to adopt new information technologies and offer targeted online services. Originality/value -This paper is the first of its kind that applies a structural equation modeling framework to develop a comprehensive online banking intensity measure, which accounts for a wide array of products and services offered online by a bank, and utilizes the estimated index in measuring the impact of internet banking intensity on bank performance.

Many businesses are now using Internet websites as a competitive tool to attract new customers, improve service quality, and boost overall financial performance. Recent studies have identified a number of website development and evaluation guidelines required to enhance the effectiveness of these new technologies in achieving these goals. One of these guidelines relates to the importance of website usability in improving business performance. To achieve this goal, a unified measure of web usability is developed using a number of relevant guidelines, which were initially proposed by Nielsen and Tahir (2002), and then the estimated index is used to measure its impact on community bank performance. Results based on a multiple regression model show that banks with higher usability score perform significantly better than those with lower score.