Title: Digital banking service in Indonesia: Does it really matter for bank performance? Evidence from Indonesian commercial banks

Authors: Nurmadi Harsa Sumarta; Muhammad Agung Prabowo; Nugroho Saputro

Addresses: Doctoral Student of Environmental Science, Universitas Sebelas Maret, Jalan Ir. Sutami No. 36A, Jebres, Kota Surakarta, Solo, Jawa Tengah, 57126, Indonesia ' Faculty of Economics and Business, Universitas Sebelas Maret, Jalan Ir. Sutami No. 36A, Jebres, Kota Surakarta, Solo, Jawa Tengah, 57126, Indonesia ' Center for Fintech and Banking, Universitas Sebelas Maret, Jalan Ir. Sutami No. 36A, Jebres, Kota Surakarta, Solo, Jawa Tengah, 57126, Indonesia

Abstract: This paper aims to empirically investigate whether providing digital banking facilities to customers impacts bank performance. Our study analyses secondary data from 91 commercial banks in Indonesia in 2017-2018 with a total of 182 observations using multiple regression analysis. We find that all commercial banks in Indonesia have engaged themselves in digital banking in 2017-2018, although smaller banks still have limited features. Further, our empirical evidence demonstrates that digital banking positively affects bank performance. Providing more digital banking facilities results in better financial performance, specifically in efficiency and profitability. Our study suggests that commercial banks in Indonesia engage more in digital banking service at least by providing high-quality digital services that suit the needs of the bank's customers. Finally, considering the rapid development of digital financial services, we also suggest the Indonesia Financial Service Authority continuously conduct proper supervision to ensure the security of digital banking service in Indonesia.

Keywords: digital banking; commercial banks; bank performance; efficiency; profitability.

DOI: 10.1504/IJMEF.2022.127159

International Journal of Monetary Economics and Finance, 2022 Vol.15 No.4, pp.374 - 385

Received: 07 May 2021
Accepted: 27 Jan 2022
Published online: 23 Nov 2022 *

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