Digital Transformation in Banking Sector: The Effect of Covid-19 Pandemic in Indonesia
Keywords:
Digitalization, Financial Performance, COVID-19
Abstract
The provision of digital services can support the need for integrated financial services, enhance operational cost efficiency, and improve financial performance. This research aims to examine the impact of providing digital services on the financial performance of banks before and during COVID-19, as well as to compare the impact on Islamic banks and conventional banks in Indonesia. This research utilizes secondary data from 15 Islamic banks and 20 conventional banks in Indonesia during the years 2017 - 2022, and estimates by static panel data model such as the fixed effect model (FEM) and random effect model (REM). The findings of this research indicate that the development of digital services significantly influences the financial performance of both Islamic and conventional banks, both before and during COVID-19. Furthermore, there are differences in the impact of providing digital services between Islamic banks and conventional banks before COVID-19. These findings may indicate the effectiveness of banks in developing services and enhancing overall technology adoption.
References
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Sutarti, Syakhroza, A., Diyanty, V., and Dewo, S.A. (2019). Pengaruh Adopsi Inovasi Teknologi E-Banking Terhadap Kinerja Dengan Efektivitas Pengendalian Intern Sebagai Variabel Moderasi (The Effects Of The Adoption Of E-Banking Technology Innovation On The Performance With The Internal Control Effectiveness As The Moderating Variable: An Evidence From Commercial Banks In Indonesia). Jurnal Akuntansi dan Keuangan Indonesia: Vol. 16: Iss. 1, Article 3. DOI: 10.21002/jaki.2019.03
Sullivan, R.J. & Wang, Z. (2013). Internet Banking: An Exploration in Technology Diffusion and Impact. FRB Richmond Working Paper, No. 13-10
Theiri, S. & Hadoussa, S. (2023). Digitization effects on banks’ financial performance: the case of an African country. Competitiveness Review. https://doi.org/10.1108/CR-10-2022-0147
Wirdiyanti, R. (2018). Digital Banking Technology Adoption and Bank Efficiency: The Indonesian Case. OJK Working Paper WP/18/01
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Adewale, A.A. & Ismal, R., (2019). Digital Transformation in Islamic Banking. IFSB Working Paper Series. WP-19/12/2020.
Ahsan, T. & Qureshi, M.A. (2021). The impact of Islamic banking model and Islamic financial development on bank performance: evidence from dual banking economies. International Journal of Islamic and Middle Eastern Finance and Management, Vol. 15 No. 3, pp. 602-625.
Akhisar, I., Tunay, K.B. & Tunay, N., (2015). The Effects of Innovations on Bank Performance: The Case of Electronic Banking Services. Procedia - Social and Behavioral Sciences, Vol. 195, pp 369 – 375. https://doi.org/10.1016/j.sbspro.2015.06.336
Almulla, D. & Aljughaiman, A. (2021). Does financial technology matter? Evidence from an alternative banking system. Cogent Economics & Finance, 9:1, 1934978. https://doi.org/10.1080/23322039.2021.1934978
Balkan, B. (2021). Impacts of Digitalization on Banks and Banking. In: Bozkuş Kahyaoğlu, S. (eds) The Impact of Artificial Intelligence on Governance, Economics and Finance, Volume I. Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application. Springer, Singapore.
Banna, H., Hassan, M.K., Ahmad, R. and Alam, M.R. (2022), "Islamic banking stability amidst the COVID-19 pandemic: the role of digital financial inclusion", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 15 No. 2, pp. 310-330.
Berger, A. N. (2003). The Economic Effects of Technological Progress: Evidence from the Banking Industry. Journal of Money, Credit and Banking, 35(2), 141–176
Berger, A. N., & DeYoung, R. (2006). Technological Progress and the Geographic Expansion of the Banking Industry. Journal of Money, Credit and Banking, 38(6), 1483–1513
Dadoukis, A., Fiaschetti, M., & Fusi, G., (2021). IT adoption and bank performance during the Covid-19 pandemic. Ecconomic Letters, Vol. 204. No. 109904. https://doi.org/10.1016/j.econlet.2021.10990
Goldfarb, A & Tucker, C. (2019). Digital Economics. Journal of Economic Literature, Vol 57, March 2019 (1), pp. 3–43. DOI: 10.1257/jel.20171452
Gujarati, D.N., & Porter, D.C. (2009). Basic Econometrics. Fifth Edition. Boston: McGraw-Hill.
Karim, S., Naeem, M. A., & Abaji, E. E. (2022). Is Islamic FinTech Coherent with Islamic Banking? A Stakeholder’s Perspective During COVID-19. Heliyon, 8(9), e10485. https://doi.org/10.1016/J.HELIYON.2022.E10485
Ky, S., Rugemintwari, C., & Sauviat, A. (2019). Is Fintech Good for Bank Performance? The Case of Mobile Money in the East African Community. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3401930
Lanotte, M & Trapanese, M. (2023). Financial Intermediation and New Technology: Theoretical and Regulatory Implications of Digital Financial Markets. Bank of Italy Occasional Paper No. 758. https://doi.org/10.2139/SSRN.4464132
Nguyen, Q.T.T., Ho, L.T.H. and Nguyen, D.T. (2023). Digitalization and bank profitability: evidence from an emerging country. International Journal of Bank Marketing. Vol. 41 No. 7, pp. 1847-1871. https://doi.org/10.1108/IJBM-03-2023-0156
Ozili, P. K. (2018). Impact of Digital Finance on Financial Inclusion and Stability. Borsa Istanbul Review, 18(4), 329–340
Paltrinieri, A., Dreassi, A., Rossi, S. & Khan, A. (2021). Risk-Adjusted Profitability and Stability of Islamic and Conventional Banks: Does Revenue Diversification Matter?. Global Finance Journal, Vol. 50
Phan, D.H.B., Narayan, P.K., Rahman, R.E., & Hutabarat, A. (2020). Do financial technology firms influence bank performance?. Pacific-Basin Finance Journal, Vol. 62.
Šeho, M., Ibrahim, M. H., & Mirakhor, A. (2021). Does Sectoral Diversification of Loans and Financing Improve Bank Returns and Risk in Dual-Banking Systems? Pacific-Basin Finance Journal, 68, 101619. https://doi.org/10.1016/J.PACFIN.2021.101619
Skhaikh, I. & Anwar, M. (2022). Digital bank transactions and performance of the Indian banking sector. Applied Economics, 55:8, 839-852, DOI: 10.1080/00036846.2022.2094880
Sutarti, Syakhroza, A., Diyanty, V., and Dewo, S.A. (2019). Pengaruh Adopsi Inovasi Teknologi E-Banking Terhadap Kinerja Dengan Efektivitas Pengendalian Intern Sebagai Variabel Moderasi (The Effects Of The Adoption Of E-Banking Technology Innovation On The Performance With The Internal Control Effectiveness As The Moderating Variable: An Evidence From Commercial Banks In Indonesia). Jurnal Akuntansi dan Keuangan Indonesia: Vol. 16: Iss. 1, Article 3. DOI: 10.21002/jaki.2019.03
Sullivan, R.J. & Wang, Z. (2013). Internet Banking: An Exploration in Technology Diffusion and Impact. FRB Richmond Working Paper, No. 13-10
Theiri, S. & Hadoussa, S. (2023). Digitization effects on banks’ financial performance: the case of an African country. Competitiveness Review. https://doi.org/10.1108/CR-10-2022-0147
Wirdiyanti, R. (2018). Digital Banking Technology Adoption and Bank Efficiency: The Indonesian Case. OJK Working Paper WP/18/01
Yunita, P. (2021). The Digital Banking Profitability Challenges: Are They Different Between Conventional and Islamic Banks?. Jurnal Akuntansi dan Keuangan Indonesia, Vol. 18: Iss. 1, Article 4. DOI: 10.21002/jaki.2021.04
Published
2024-11-30
How to Cite
Aisyah Nurjannah Siwi, Risna Triandhari, & Raden Parianom. (2024). Digital Transformation in Banking Sector: The Effect of Covid-19 Pandemic in Indonesia. LAA MAISYIR : Jurnal Ekonomi Islam, 1(1), 123-140. https://doi.org/10.24252/lamaisyir.v1i1.52940
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