Reduction of Transaction Costs by Using Electronic Commerce in Financial Services: An Institutional Empirical Approach

Abstract

This chapter introduces the Transaction Cost Approach as a means of analyzing specific transactions in financial services by using the theoretical framework of New Institutional Economics. It argues that transaction costs can be assessed and used to compare different business processes. Furthermore, these costs allow a detailed explanation why certain underlying technologies which form the basis for transactions become widely accepted whereas others do not prevail. The authors emphasize the relevance of this approach and its application to the field of electronic commerce both on a theoretical and practical level to document and to interpret current trends in this sector on the one hand, and to predict future developments on the other hand.