Spatial Competition with Online Platforms : An Empirical Analysis of the Wealth Management Product Market

We study wealth management products (WMPs) issued by banks and find higher prices online than offline. The explanation is: banks must charge lower prices at physical branches to compensate customers for traveling costs. The online-offline price gaps decrease with the share of online-banking users, the number of incumbent banks, and a bank’s branch density and clustering. WMP markets provide an ideal scenario to identify the effect of spatial competition on the online-offline spread because online and offline channels for issuing WMPs (selling financial products) do not differ in delivery, search, or waiting costs or the convenience of inspecting product quality