On the development of innovations in improving the efficiency of commercial banks in the context of technological sovereignty

Digital finance, bank competition shocks and operational efficiency of local commercial banks in Western China

Purpose – The purpose of this paper is to estimate the cost and profit efficiency (PE) of Chinese commercial banks in the last ten years and investigate how market power affects bank efficiency and stability. Design/methodology/approach – The paper builds a stochastic frontier analysis model to evaluate the cost and PE of commercial banks. The paper then uses a Lerner index and Z-index to represent market power and stability, respectively. In addition, the paper empirically analyzes the relationship between market power and bank efficiency, stability in the last ten years. Findings – The results show that the efficiency of banks on the Chinese mainland increased during the study period, but is still lower than that of banks in Hong Kong; moreover, the efficiency of four state-owned commercial banks is lower than that of medium and small banks. Market power has a negative relationship with efficiency while its relationship with stability varies among Chinese banks. Research limitations/implications – The results imply that the promotion of financial liberalization and banking reform to introduce an appropriate competition mechanism has had a positive effect on the efficiency and stability of Chinese commercial banks. Practical implications – Thus, the paper will contribute to deepen reform and opening up the banking sector in China. Social implications – The healthy development of banking can enhance the ability of banks to withstand financial risks, to promote the harmonious development of society. Originality/value – The paper estimates the cost and PE of Chinese commercial banks using SFA model and investigates how market power affects bank efficiency and stability. The study design has a certain novelty, where Lerner index and Z index are used, respectively, to measure market power and stability and management efficiency of commercial banks is investigated from two aspects – PE and cost efficiency – by the translog cost function, instead of Douglas production function. In addition, the paper tries to put some of Hong Kong banks included in the study sample, and has a certain reference value.

In this paper, DEA model is used with the panel data of 21 commercial banks gathered during period 2006–2014 to measure the technical efficiency, pure technical efficiency and scale efficiency of commercial banks in China. Furthermore, a regression model for the factors affecting the efficiency of commercial banks is established with three levels includes the banking industry structure, the micro-level of commercial banking, and the macro-economic performance. The results show that the improvement of market competition level is beneficial to promote the efficiency of commercial banks. The risk control capacity, business innovation capability, and foreign capital involvement have positive influence on commercial banks’ efficiency. The market share and scale efficiency are inversely proportional in large state-owned commercial banks. The market share and scale efficiency are proportional in joint-equity commercial banks and municipal commercial banks. The broad money supply growth rate has positive influence on commercial banks’ efficiency improvement.

Will the development of FinTech improve the efficiency of commercial banks in China? In recent years, FinTech has been continuously developing and applying to the financial industry which has brought opportunities and challenges to the operation and management of commercial banks in China. We focus on the empirical analysis of the impact of FinTech on the operating efficiency of commercial banks. By examining Chinese commercial banks as an empirical sample, we find that the development of FinTech has a significant role in promoting the efficiency of Chinese commercial banks. On this basis, we further compared the feedback of changes in the efficiency of different Chinese commercial banks to the development of FinTech. Accordingly, the efficiency changes of city commercial banks in China have been most significantly affected by the development of FinTech. Based on the empirical results, the financial development elements are further added to explore the geographical characteristics of city commercial banks. We find that the development of FinTech has a stronger effect on the efficiency change of city commercial banks in areas with higher levels of financial development.

In the conditions of change in the market environment, new information banking technologies are appearing, which have a favorable effect on the banking sector and the development of the economy. It was determined that the introduction of innovative technologies will ensure the activation of innovative development of banks, which will contribute to increasing competitiveness, work efficiency, and also guarantee the trust of clients. It was found that an important task of the bank is to provide innovative activities in order to improve their work. The directions of innovative development of JSC "PUMB", in which the bank constantly directs investments, are considered. It was determined that digital banking products and services for remote customer service are being used, online service for individuals is carried out in the "PUMB Online" application, and online service for corporate clients in the "PUMB Online" application. An analysis of the effectiveness of the innovative activities of JSC "PUMB" was conducted and it was determined that during 2021 there will be an improvement in the economic efficiency of innovations, an increase in profit growth, which indicates the effectiveness of innovative banking technologies. The state of financial support for the innovative activities of JSC "PUMB" was investigated and the insufficient level of provision of financial resources was determined, which is due to the negative influence of factors of the internal and external environment. Problems in the innovative activity of the banking sector are identified, namely: slow introduction of information banking technologies; insufficient level of financial support and high cost of innovative technologies; adverse investment environment; lack of qualified personnel; variability of the legislative framework; increase in the level of economic risk; a small number of scientific organizations involved in the development of information banking technologies; lack of interest of banks in innovative development. Ways to activate the innovative development of the bank have been formed. The implementation and use of innovations in banking requires financial support and will allow to obtain additional income, increase the effectiveness of banking supervision and control, neutralize the impact of risks, and create conditions for stable development.

With the in-depth development of global economic integration, the competition in the financial industry at home and abroad has become more and more severe, and the innovation of financial products has gradually become a new development trend in the financial industry. For commercial banks, strengthening the innovation of financial products can attract more customers, thus reaping more substantial income and maintaining an advantageous position in the market competition. However, in the process of financial product innovation of commercial banks, the financial risks are also increasing, and how to achieve effective management of financial product innovation risks has become one of the hot topics of concern in the field of commercial banks. This paper takes the study of risk management of technological, financial product innovation of commercial banks as an example, based on methods of big data analysis algorithms, analysis of correlation, analysis of effects, analysis of Variance and analysis of regression, through questionnaires and research results, literature review, to explore Commercial Bank’s Risk Management Behavior on the innovation of its scientific and technological financial product(CBRMB) and its influencing factors. Regarding CBRMB, It mainly describes the degree of its risk influence through the following two aspects, including the number of inspectors and research budget, and among the influencing factors research Commercial bank's Risk management (CBRM), Commercial bank's Human Resource management (CBHRM), Commercial Bank's supervision ability on its Financial product innovation (CBSA), Commercial Bank's Internal control system (CBICS), and Commercial Bank's Development of scientific and technological financial products (CBD). According to the regression model operation results, commercial banks can refer to the research recommendations and optimize their scientific and technological innovation and risk management, improve the problems in the risk system, and enhance the operational efficiency of commercial banks to promote the healthy development of the financial market.

This study analyzes internal and external factors that affect banking efficiency by using quarterly data for 2013-2017. The sample includes conventional and Islamic commercial banks. Hypothesis testing uses the Tobit regression model. The results show that the loan to deposit ratio/ financing to deposit ratio (LDR/FDR), the net interest margin/net operating margin (NIM/NOM), the capital adequacy ratio (CAR), and economic growth have a significantly positive effect on the efficiency of commercial banks. The NIM/NOM, the BI-rate, and the inflation have no effect on the efficiency of commercial banks. According to another analysis, factors that influence the efficiency of the results show that in conventional commercial banks, the LDR, the CAR, economic growth, and inflation have a significantly positive effect on the efficiency of conventional commercial banks. In contrast, the NIM has a significantly negative effect. Meanwhile, for Sharia commercial banks, the FDR, NPF, the CAR, economic growth and inflation have a significantly positive effect, and the BI-rate has a significantly negative effect.

The paper aims to estimate factors affecting supply chain efficiency in commercial banks’ operations in Vietnam. To achieve this objective, the study uses structural equation modeling (SEM) to define the determinants of supply chain efficiency in operational activities of commercial banks. The findings reveal the statistically significant factors influencing supply chain efficiency in commercial banks’ profitability, including information and communication technology, knowledge and information, quality trust, and culture. The research contribution opens an additional aspect into the supply chain in commercial banks’ operations that makes the managers and stakeholders reorient themselves in the banks’ developing operations. Besides, the authors implement SEM applications in testing and evaluating the multivariate causal relationships between supply chain efficiency and banks’ profitability.

The efficiency of commercial banks is important for Chinese banking to prevent risk and improve the competitiveness, and also the core for China to deepen financial reform. By using the DEA-Malmquist indices approach, the efficiency and the efficiency changes of 14 China’s commercial banks during the period of 2007–2010 were analyzed in this paper. Results showed that the average efficiency of State-owned commercial banks is generally lower than that of joint-stock commercial banks and the urban commercial banks, the average efficiency of urban commercial banks is the highest; the overall efficiency of 14 banks is improved in 4 year due to efficiency progress and technical advance.

One of the major areas of macro-economy that has been the subject of focused attention is the efficiency of the banking sector. The major objectives of Indian banking sector reforms were to encourage operational self-sufficiency, flexibility and competition in the system and to increase the banking standards in India to the international best practices. The present study attempts to examine the changes in the productive efficiency of Indian commercial banks after financial sector reforms were initiated in 1992. Analysis of production based efficiency can be viewed as another form of representation of the financial performance of the micro level units of the banking sector. This paper seeks to determine the impact of various market and regulatory initiatives on efficiency improvements of Indian banks. Efficiency of firm is measured in terms of its relative performance that is, efficiency of a firm relative to the efficiencies of firms in a sample. Data Envelopment Analysis (DEA) has been used to identify banks that are on the output frontier given the various inputs at their disposal. The present study is confined only to the Constant-Return-to-Scale (CRS) assumption of decision making units(DMUs).

This study investigates the impact of Financial Technology (FinTech) on the efficiency of commercial banks in India. It explores whether FinTech enhances operational productivity and fosters financial inclusion in the rapidly evolving financial landscape. The research employs an empirical framework, analyzing annual data from 2012 to 2022 for 29 Indian commercial banks. Efficiency is measured using the Data Envelopment Analysis (DEA)-based Malmquist Index, while the FinTech Development Index is constructed using text-mining techniques. Regression models, including Pooled OLS, Fixed Effects, Random Effects, and Generalized Method of Moments (GMM), are employed to test hypotheses. The results indicate that FinTech adoption significantly enhances commercial bank efficiency. Innovations like mobile banking, digital payments, and blockchain technology improve customer experiences while reducing operational costs. Positive correlations were observed between FinTech development, GDP growth, and capital adequacy ratios, supporting the hypothesis that FinTech is a catalyst for efficiency and innovation in banking. The study is limited to Indian commercial banks and relies on secondary data. Future research could extend the scope to include comparative analyses across emerging markets and incorporate primary data for deeper insights. The findings emphasize the need for Indian banks to embrace digital transformation by integrating FinTech solutions into their operations. This approach could foster financial inclusion, enhance service delivery, and bolster economic growth. By leveraging FinTech, banks can improve access to financial services for underserved populations, contributing to poverty alleviation and economic equity. This study provides empirical evidence of the transformative role of FinTech in enhancing commercial banking efficiency in India, offering actionable insights for policymakers, financial institutions, and stakeholders.

The purpose of this paper is to investigate the impact of technological innovation on the cost efficiency of Vietnamese commercial banks from 2009 to 2022. The paper uses the data envelopment analysis (DEA) method combined with the Tobit regression model to examine the impact of technological innovation on the cost efficiency of Vietnamese commercial banks. Using a sample of 35 commercial banks from 2009 to 2022, the findings indicate that technological innovation has a significant positive impact on cost efficiency, suggesting that banks investing in advanced technology tend to improve their operating performance. Furthermore, factors such as profitability, bank size, equity ratio, and economic growth contribute positively to cost efficiency. In contrast, bad debts and inflation are associated with negative impacts. The study concludes that to improve efficiency, commercial banks should continue to invest in technological advancements, strengthen financial capacity, and effectively manage bad debts. These findings provide practical implications for bank managers and policymakers, especially in the context of the ongoing digital transformation in the banking sector.

The recent global crisis has highlighted the role of prudent supervision and regulation in the financial system on both a national and a global scale. As an emerging market, the Turkish banking sector experienced the banking reform process almost a decade ago. The legal and institutional structure of the Turkish banking sector changed tremendously after the twin crises of 2000 and 2001. The aim of this study is to assess the impact of the regulatory policies on the efficiency of different-sized commercial banks in the Turkish banking sector during the period 2002-10. We implement a new approach in data envelopment analysis (DEA) that integrates lending quality and apply it to bank efficiency analysis. DEA is used to assess the long-term performance trend in the context of balance sheet and revenue approaches. Empirical results indicate that regulatory policies have a positive effect on the efficiency of banks. Large- and medium-size banks outperform medium-large and small banks. The notable finding is that the efficiency scores are much lower, and the global crisis more apparent, when nonperforming loans are integrated into the DEA Model.

There is a rapid development of innovative technologies in the financial sector of the Russian economy. Innovative technologies influence both the development of individual segments of the financial sector of the economy, the formation and development of new products and services, and significantly affect the change and transformation of traditional business models of market participants. One of such changes can be called the transformation of the largest Russian commercial banks into digital banking ecosystems. The object of this article is the largest Russian commercial banks. The subject of the study is financial mechanisms, quantitative and qualitative indicators of the activities of the largest Russian commercial banks in the context of the formation of digital ecosystems in Russia. The purpose of the study is to analyze the conditions and methods of transformation of the largest Russian commercial banks into digital banking ecosystems. To achieve this goal, the works of Russian and foreign authors on the formation and development of digital ecosystems, the provision of financial services, and the digitalization of commercial banks were studied. Based on the statistical data of the Bank of Russia and the reports of commercial banks, the analysis of the current state of activity of the banks selected for analysis was carried out. The author's definition of the concept of digital banking ecosystem is given in the article. Four main areas in which a full-fledged digital banking ecosystem should meet the needs of its customers have been identified and studied. The main conclusion of this study is that the largest Russian commercial banks create digital banking ecosystems by buying companies from various sectors of the economy and developing their own structures. The main tasks of digital banking ecosystems are not only meeting the needs of customers in financial services, but also in such areas as entertainment, IT and daily needs. Thus, digital banking ecosystems are maximally aimed at attracting and further retaining customers within their services.

The impact of the Covid-19 pandemic has caused the condition of the banking sector, both conventional and sharia, in Indonesia to be unstable due to the policy of limiting the Covid-19 pandemic period which affects the efficiency of bank performance on credit and financing activities disbursed as well as bank operations. This research aims to measure the level of efficiency of Conventional Commercial Banks (CCB) and Sharia Commercial Banks (SCB) in Indonesia after the Covid-19 pandemic and to find out whether or not there is a difference in efficiency between CCB and SCB after the Covid-19 pandemic. The method used in this study is a quantitative method with a Data Envelopment Analysis (DEA) analysis model and a different test with the inputs used, namely capital, assets, deposits, and operational costs, then the output consists of credit and financing realization, as well as operating income. The results showed that CCB achieved an average efficiency level of 98.8 percent and SCB achieved an average efficiency level of 98.6 percent, which means that both banks have reached high efficiency levels after the Covid-19 pandemic. Then CCB and SCB experienced fluctuations that tended to be the same, so that the results of different tests showed a probability value of 0.9138 and greater than 0.05, then H0 was accepted which means that there is significantly no difference between the efficiency of CCB and SCB after the Covid-19 pandemic. DOI: 10.26905/jkdp.v27i4.9776