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Prof. Jung Koo Kang
Assistant Professor of Business Administration
Faculty Affiliate, Digital Value Lab
Harvard Business School

We examine whether technologies deployed in banks’ customer-facing functions improve their capacity to produce information about future macroeconomic conditions. Increasingly adopted to enhance customer engagement, these technologies, such as web analytics and behavioral tracking software, also enable banks to collect timely and granular data that are valuable for predicting local economic conditions from a broad base of current and prospective customers. Using a novel measure of customer-facing technology deployment extracted from banks’ website source code, we find that banks with greater use of these technologies record loan loss provisions that more closely track future local economic conditions. This result is driven by web technologies that capture macro-relevant data, rather than by those lacking such capabilities. We also find that the effect is more pronounced for banks with larger, more digitally engaged customer bases, and for those operating in regions characterized by higher economic volatility or greater sensitivity to macroeconomic conditions. In addition, banks employing these technologies incorporate more macroeconomic content into their financial disclosures. We further corroborate these findings using a bank’s designation for CFPB supervision as an instrument for customer-facing technology deployment. Overall, our results suggest that digital technologies embedded in customer-facing functions play a distinct role in shaping banks’ information production and financial reporting.