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The Effects of Technology on Bank Performance in Advanced and Emerging Economies: An Empirical Analysis
Abstract
Electronic banking is a very popular aspect almost all over the world especially in the last few years. Banks make investment in this area in order to attract the attention of the customers. Therefore, it can be possible to survive in such a competitive environment. In the literature, it is also discussed that making investment into the technological aspects has an important contribution to the financial performance of the banks since it increases efficiency in banking operation. Similarly, in this chapter, the effects of electronic banking technologies on bank profitability and costs are investigated. The analyzes are performed with aggregated data from 23 developed and emerging economies covering the 2005-2015 period. The relationship between the electronic bank services and various performance and cost criteria such as ROE, cost to total income ratio, non-interest income, and overhead expenses to total assets ratio has been analyzed. The findings show that the increase in the use of electronic banking technologies has a positive impact on profitability and a negative impact on costs. Banks' investments in technological innovations improve both their productivity, product and service quality, and profitability performance. While considering the issues emphasized in this study, it can be recommended that banks should increase their investments for the technological improvement in order to have higher financial performance.
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