In this paper we propose a conceptual model to analyse innovations originating from the diffusion of Information Technologies in the banking sector. We argue that technical change in this industry exhibits a revolutionary character. A distinction is made between the mass automation regime, focusing mainly on the mechanization of back-office procedures in the 1960s and 1970s, and the smart automation regime, originating from the introduction of distributed data processing and network technologies and centered around the supply of electronic banking services. A theoretical model is developed which emphasizes the crucial role played by demand-pull variables in stimulating innovative behaviour under the smart automation regime. In contrast, limited importance is attributed to cumulative and learning-by-doing effects relating to back-office automation, at least for banks endowed with sufficient absorptive capacity. The theoretical hypotheses are tested through an econometric analysis of the determinants of the innovative behaviour in electronic payment systems of a sample of Italian commercial banks.