Online Banking Users vs. Branch Visitors: Why Are Their Portfolio Returns Different?

This study investigates why portfolio returns of online banking users are higher than those of non-online users. We first demonstrate that households that are eager to improve their level of financial literacy are more likely to use online banking. Second, a marginal increase in risk appetite increases portfolio returns of online users; however, this is not the case for non-online users. Third, online banking promotes debt repayment, and this further encourages risk tolerant investments. In sum, we conclude that financial literacy efforts moderate a positive relationship between use of online banking, risk appetite, and portfolio returns. The positive relationship between use of online banking and debt repayment further increases risk appetite.