Iranian Internet banking performance evaluation by hybrid approach: DEA-PCA-DEA

Abstract

This paper presents a hybrid approach to conducting performance measurements for Iranian Internet banking by using data envelopment analysis (DEA) and principal components analysis (PCA). For each bank, DEA is applied to compute an aggregated efficiency score based on financial and non-financial outputs and inputs. The 21 combinations of DEA efficiencies of the studied banks are calculated, and used as a ranking mechanism. PCA is used to apply relative efficiencies among the banks, and to classify them into different groups in terms of operational orientations, i.e., Internet and revenue oriented banks. Identification of operational fitness and business orientation of each bank, in this way, will yield insights into understanding the weaknesses and strengths of banks, which are considering moving into Internet banking. Internet-oriented banks have the higher the number of Internet visitors. Transforming potential visitors into customers needs to higher website quality and usability. The final step of this research is website efficiency evaluation of Internet-oriented banks using DEA.