Bank Efficiency Research Articles

The evolution of technology and the transformation of the banking sector under the influence of digital trends

Banks have been using technology for decades to improve their operations. However, the pace of digital transformation has accelerated in recent years.The impact of digital transformation on the banking sector is very significant. Traditional banks must adapt to the changing digital landscape or risk losing customers to more digitally savvy competitors. One of the most significant consequences of digital transformation for ordinary banks is the change in customer expectations. Now customers expect uninterrupted and efficient banking services through all channels, including digital ones. This forces ordinary banks to invest in digital technologies in order to remain competitive.Another impact of digital transformation on conventional banks is the change in the way banks interact with customers. In the past, banks used physical branches as the main means of interacting with customers. Something more is needed to remain competitive. Banks now have to interact with customers through several channels, including mobile apps, online portals and chatbots.All these and many other digital innovations are transforming the banking sector and necessitate the study of these phenomena.

Money Laundering Practices and Operational Efficiency of Deposit Money Banks in Nigeria

This study examined the extent to which operational efficiency is influenced by the legal framework of money laundering in Nigerian commercial banks. It determined the degree of effect which the institutional and the regulatory frameworks for the practices of money laundering have on the operation’s efficiency of deposit money banks. These were to provide information on the nexus between the efficiency and the frameworks for the practices of money laundering within the banking sector in Nigeria. The research design used in this work was a survey. This work used primary data through the structured questionnaires. 900 personnel were selected as a sample size using stratified random sampling. The targeted population were the workers and customers of listed deposit money banks in Nigeria. This research work analysed the data using simple percentages as a descriptive analysis and analysis of variance (ANOVA) as an inferential statistic. The work showed that the operational efficiency of deposit money banks was significantly influenced by the legal framework for the practices of money laundering in Nigeria (t = 9.59; p < 0.05). In addition, the operational efficiency of deposit money banks was significantly affected by both the institutional framework and the regulatory framework for the practices of money laundering in Nigeria (t = 3.59; p < 0.05 and t = 2.12; p < 0.05 respectively). In conclusion, the operational efficiency of Nigerian deposit money banks changed significantly as a result of the formulation of frameworks for the practices of money laundering.

Exploring the influence of fintech patents on operation efficiency and market efficiency in Taiwan's commercial banking sector‐meta entropy dynamic two‐stage DDF model

AbstractThis paper presents a meta entropy dynamic two‐stage DDF model, incorporating significant patents in financial technology (fintech) into the analysis to examine the operational and market efficiencies of banks in Taiwan, providing new insights for research on banking performance and government policy. The results show the following. (1) The most efficient bank is Cathay Financial, while the bottom three are First Financial, E.SUN Financial, and Hua Nan Financial. (2) Financial holding companies (FHCs) outperform non‐FHCs in both operational and market stages. (3) The number of patents has a positive impact on the market stage efficiency of banks.

Post-amalgamation Performance Review of Six Public Sector Banks in India

Consolidation of public sector banks (PSBs) is a part of reorganisation efforts with an aim to improve their profitability, solvency and efficiency. Of late merger of five subsidiaries of State Bank of India and Bharatiya Mahila Bank Ltd with it in April 2017 has kindled interest in restructuring of unprofitable banks by merging them with a profitable one. In August 2019, the Government of India announced amalgamation of 10 PSBs constituting them into four entities under Punjab National Bank, Canara Bank, Union Bank of India and Indian Bank. Earlier in April 2019, another merger had taken place following the integration of Dena Bank and Vijaya Bank with Bank of Baroda. Studies reveal that while in European countries bank mergers led to improved efficiency, in Asian countries like Indonesia recapitalisation and diversification of banks improved their profitability. In a study of Nigerian banks in Africa it is revealed that post-merger, employee morale diminishes due to stress and anxiety arising out of possible job loss and possible challenges to be met in the new environment. In the present study, the authors have tried to ascertain how profitability, solvency and efficiency of banks improved post-amalgamation in six PSBs. The outcome of the result is a mixed one, while some banks improved their profitability and solvency parameters, for others it is not so perceptible. However, efficiency indicators do not have any significant result for all six of them after amalgamation.

Measurement of efficiency and its drivers in the Chilean banking industry.

This paper estimates efficiency measures for the banking system in Chile for the period 2000-2019. In contrast to previous studies, we use input-distance functions, introduce the nonparametric slack-based model, and choose the intermediate inputs approach in determining inputs and outputs. Our results suggest that the Chilean system has achieved relatively high levels of efficiency, although with no significant variation over the sample period. Ownership (government, foreign and public) and size had a positive impact on efficiency. On average, mergers and acquisitions seem to have targeted highly efficient banks in order to improve the overall efficiency of the controlling institution in the short run. Other sources of efficiency gains could be an increase in bond funding or a reduction in expenses and capital holdings. The latter could be induced by deepening the local derivatives market.

A Study on The Cost And Profit Efficiency of Islamic and Conventional Bank Islamic Windows in Oman: A Proposed Framework

Objective: This study aims to analyze the efficiency of Islamic and conventional banks and their respective Islamic windows in Oman in terms of costs and profits. Theoretical Framework: The research employs a framework that examines cost and profit efficiency within the banking sector, contrasting the performance of full-fledged Islamic banks and Islamic windows of conventional banks. This framework also investigates the impact of bank-specific variables on efficiency levels. Method: Using empirical data from the Omani banking sector, the study quantifies efficiency by analyzing bank-specific variables such as capitalization, profitability, operational costs, and loan activity. The comparison includes both Islamic banks and the Islamic windows of conventional banks as of the end of the third quarter of 2022. Results and Discussion: The findings reveal that, overall, banks in Oman are more efficient at generating profits than controlling costs. Conventional banks, on average, demonstrate higher efficiency in both cost and profit metrics compared to Islamic banks. There exists a positive correlation between both types of efficiencies and factors like bank capitalization and profitability, while a negative correlation is evident with operational costs. Furthermore, increased loan activity is associated with higher profit efficiency but adversely affects cost efficiency. Research Implications: These results underscore significant efficiency disparities between Islamic and conventional banking sectors. They highlight the need for Islamic banks to enhance their cost management strategies without compromising profit generation, leveraging the benefits derived from their association with parent conventional banks. Originality/Value: The study contributes to the literature by providing a comparative analysis of cost and profit efficiencies in Islamic and conventional banks, with a particular focus on the unique market dynamics of Oman. This research is valuable for stakeholders in the Islamic banking industry, offering insights into leveraging existing infrastructures and enhancing operational efficiencies.

Building a Banking Management System with Full Stack Java

The system encompasses a comprehensive range of functionalities crucial for efficient banking operations, including account management, transaction processing, customer relationship management, and security features. Leveraging Java's versatility, the system employs Spring Boot for backend development, Angular for frontend user interfaces, and Hibernate for database interaction, ensuring scalability, flexibility, and maintainability. Key aspects addressed in this paper include architectural design, database modeling, user interface development, security measures, and integration of essential banking features. Through a rigorous development process and adherence to industry standards, the resulting banking management system demonstrates reliability, performance, and adaptability to evolving banking needs. This paper contributes a valuable resource for developers and researchers interested in building modern, robust banking solutions using full stack Java technologies.

The impacts of the Ethiopian developmental state model on the competition, efficiency and profitability of banks

PurposeThis study examines the impacts of the Ethiopian developmental state model on the competition, efficiency and profitability of banks.Design/methodology/approachThe competition, efficiency and profitability of the Ethiopian bank are measured using Panzar Rose, data envelopment analysis and financial ratio. Fixed-effect panel regression methods are applied to test the direction and strength of association between the Ethiopian developmental state model and the competition, efficiency and profitability of the country's banks while controlling bank-specific market structure and macroeconomic factors.FindingsThe Ethiopian developmental state model embeds the state-directed financial system, which affects the banking industry using a range of credit allocation instruments. Of which, directed credit schemes, interest rate control and the lack of financial freedom reduce the competition and efficiency of banks. The National Bank of Ethiopia (NBE) advances to the government and the sale of Treasury bills to a captive market enhances banking competition while negatively affecting banking efficiency. Interest rate control and the lack of financial freedom lower banking profitability. Unexpectedly, directed credit schemes improve banking profitability.Research limitations/implicationsAs with any study, this one has limitations. The intra-period comparison of efficiency is based on balanced data. Future studies can use methods that can measure the efficiency of banks using unbalanced data. The computation of the yearly H-statistic is constrained by the small sample size. The use of high-frequency data for measuring competition can provide us with better insights into banking competition in Ethiopia. Furthermore, there are a number of methods for measuring banking competition, efficiency and profitability with different assumptions. Approaching the subject of this study by applying different methods will offer different insights.Practical implicationsThe contributions of this study to practice are at two levels. First, at the policy level, it enhances our understanding of the impacts of developmental state model policies, as implemented in Ethiopia, on the banking industry and therefore provides suggestions to policymakers to reform the sector's policies. Second, it offers input to the management of banks regarding the factors that impact the industry.Originality/valueThe banking industry is often studied in the context of financial liberalisation. The originality of this study lies in investigating how the competition, efficiency and profitability of banks are affected when operating in the context of significant state interventions in the industry.

Cloud Enabled e-Banking Payment Security Implementation using Blockchain Technology

Cloud computing has revolutionized the banking industry by offering flexible and flexible products for the delivery of electronic banking services. However, due to the sensitivity of the central authority, ensuring the security of online transaction is still a critical issue. In this context, blockchain technology is promising by offering decentralization, transferability and cryptographic security. This article presents a new way to increase the security of electronic banking payments by combining blockchain technology with cloud computing. The system plans to use the cloud to host business applications and services, and use blockchain to securely record and verify transactions. Smart contracts are used to streamline the payment process and manage transactions, providing transparency and trust. Additionally, encryption technology is used to encrypt sensitive information and protect the user's identity. Using this solution provides many benefits, including improving the security, transparency and efficiency of electronic banking. Research articles and experimental results demonstrate the effectiveness and applicability of the proposed process in real life. Overall, the integration of blockchain technology with cloud banking provides a solution to solve security issues and increase the reliability of online payments.

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

The rise of information technology has triggered the digital financial revolution and reshaped the competitive landscape of the commercial banking industry. This transformation has profoundly affected the operating efficiency of many small and medium-sized traditional commercial banks in Western China. We combine panel data from 130 local commercial banks in Western China from 2008 to 2021 to investigate the impact of digital finance on the operational efficiency of these local commercial banks. Our findings indicate that the overall operational performance of local commercial banks in Western China has declined under the influence of digital finance. Additionally, the intensification of banking competition has disrupted the established traditional market competition structure, with this mechanism exerting a more pronounced weakening effect on the operational performance of these local banks. This research provides rational recommendations for the high-quality development of the banking industry in the Western region, thereby enhancing the quality and efficiency of commercial banks' services to the real economy.

Does digital transformation increase bank profit efficiency? Evidence from China

Utilizing data from 2014 to 2020 on Chinese commercial banks, this study investigates the effects of digital transformation on bank profit efficiency. A unique digital transformation index was constructed for commercial banks using the entropy method, incorporating diverse, hand-collected data sources. The results reveal a significant positive relationship between digital transformation and profit efficiency in banks. This association is primarily attributed to digital transformation's role in boosting revenue and reducing costs, consequently improving profit efficiency. These conclusions remain steadfast even after accounting for various robustness checks and potential endogeneity issues.

The Impact of Financial Technology Expenditures on Attracting Deposits and Investing Funds: An Applied Study on Jordanian Islamic Banks

Purpose: The study aims to demonstrate the impact of financial technology expenses on attracting deposits and utilizing funds within Jordanian Islamic banks. Method/design/approach: To achieve this, the researchers used a descriptive-analytical approach to describe the phenomenon of financial technology expenses from 2016 to 2022, and to analyze its effect on deposit attraction and fund utilization in the relevant banks. Results and conclusion: The study's results indicated a tangible and positive impact of financial technology expenses on deposit attraction in Jordanian Islamic banks during the studied period. Additionally, the results also demonstrate a positive effect of financial technology expenses on the volume of funding and investment in Jordanian Islamic banks during the studied period. Statistical analysis revealed that these results have statistical significance, suggesting that financial technology expenses have a strong and tangible impact on deposit attraction and fund utilization in Jordanian Islamic banks. Research implications: The study results suggest that upcoming research could delve into the policy implications, for bodies to back fin.tech integration in Jordan's banking industry. Subsequent inquiries could examine customer behavior risk management approaches and the lasting viability of fin.tech investments. Moreover conducting studies across regions and pinpointing future research avenues are essential to enhance comprehension of how fin.tech influences deposit attraction and fund utilization, in Islamic banks. Originality/value: The Significance of this research lie, in its investigation of the effects of fintech spending on banks in Jordan shedding light on the merging realms of Islamic finance and contemporary technology. The results offer advice for decision makers, banking leaders and scholars striving to boost the efficiency and competitiveness of banking, in Jordan and other regions.

Weight-restricted approach on constant returns to scale DEA models: Efficiency of internet banking in Turkey

The performance measurement of decision-making units (DMUs) can be optimised by strategically choosing the optimal input and output weights. This approach circumvents the potential complexities associated with establishing a common basis for ranking homogeneous units and managing the results from multiple efficient frontiers. Efficient frontier ranking is simplified by limiting the weights based on the intrinsic or technical connections between relevant inputs and outputs. It also creates a coherent framework that coordinates various considerations across all under-evaluated DMUs and variables. This method effectively examines the complexities related to the inputs and outputs of homogeneous units using conventional data envelopment analysis (DEA) models to evaluate the efficiency of these units.In the banking sector, the relationship between inputs and outputs is complex. This complexity requires careful attention, particularly in cases where the existence of one input or output is conditional on the existence of another. This dynamic is accentuated by the integration of advanced fintech solutions, which inherently provide significant benefits to banking operations. The use of appropriate analytical models for banking data is important. The synergy between advanced financial technologies and analytical methods has reached its peak in reducing losses and strengthening profits. This, in turn, facilitates the optimal allocation of financial resources to growth-oriented projects.The empirical application of weight-restricted DEA models to Turkey's mobile-internet-banking sector underscores their efficacy. These modified models contrast with the standard DEA versions, which often encounter challenges stemming from the allocation of weights to pivotal variables. This study demonstrates the tangible benefits of our approach and its potential to revolutionise the efficiency assessment landscape in the banking sector.The proposed unconventional model which is applied to Turkish Internet banking for the period extending from 2006 to 2018 and which takes a comprehensive weight restriction approach to DEA and encompasses all relevant input and output variables, resulted in strictly positive weights and a reduced count of inflated efficient units along with their scores. This is practically beneficent to banking sector in so far as it facilitates decision-making and related economic and financial planning, and as it proves to be a reliable benchmark by local or international banks intending to provide or develop Internet banking services.

Advancing group efficiency evaluation in DEA with negative data: an empirical application in the banking industry

Data Envelopment Analysis (DEA) plays a pivotal role in assessing production unit efficiency. This study extends group efficiency assessment within the banking sector by utilizing the Modified Semi-Oriented Radial Measure (MSORM) model, specifically designed to handle negative data. It introduces two distinct efficiency definitions and develops models for their evaluation within these groups. Focusing on banks as decision-making units, the MSORM model delves into the intricacies of group efficiency. By effectively addressing negative data complexities, it enables a comprehensive evaluation of bank efficiency across various group frameworks. The study further examines the efficacy of efficiency definitions based on average and weakest performances within the MSORM framework. Empirical findings reveal significant variations in group efficiency assessment under different paradigms, highlighting the impact of the evaluation approach. This research contributes valuable insights into performance variations within the banking industry and aids in enhancing efficiency evaluations in banking systems.

On modelling non‐performing loans in bank efficiency analysis

AbstractThis paper introduces a methodological framework for the examination of non‐performing loans (NPLs) as reverse outputs under the extended strong disposability assumption, which does not require NPLs to be jointly produced with net loans, as it is implied when they are modelled as undesirable outputs. A directional distance function model with reverse outputs is used and is compared with the models that treat NPLs as an undesirable output under the weak disposability and the constrained weak disposability assumptions with uniform and non‐uniform abatement factors. The model is applied at the case of European banks and for the sample to be representative the banks are chosen based on the European Banking Authority (EBA) stress test of 2021. The results indicate that the reverse output model have greater discriminatory power relative to all other models.

Research on the Impact of Digital Inclusive Finance on the Operational Efficiency of Joint-stock Banks

Research on the Impact of Digital Inclusive Finance on the Operational Efficiency of Joint-stock Banks

How Does Fintech Lending Affect Islamic Local Banks' Efficiency During COVID-19 Pandemic in Indonesia?

Fintech lending, also known as peer-to-peer (P2P) lending or online loans, refers to lending provided by non-bank financial technology-based companies that provide financial services by connecting lenders and borrowers on a specific online platform. This paper investigates the impact of fintech lending development on the efficiency of Islamic local banks in Indonesia. Local banks are chosen because they differ from national commercial banks in terms of their characteristics and products, and they also serve limited customers in a specific local area (i.e., provincial level). The presence of Islamic local banks in Indonesia is unique because it fills the gap and has a significant contribution to Muslims who do not have (or do not need) access to larger Islamic commercial banks. This is particularly noteworthy given that Indonesia is the most populous Muslim country. Using a sample of 161 Islamic local banks in Indonesia and provincial-level fintech lending data from 2020Q1 to 2020Q4, we find that fintech development in Indonesia erodes Islamic local banks’ efficiency, suggesting that their presence is significant and could also be damaging for local banks. However, our finding reveals that the negative effects of fintech development can be reduced in banks with higher levels of efficiency. Our results call for policymakers to monitor the development of fintech to maintain a lending ecosystem that can ultimately relate to financial service stability.

REGULATORY FRAMEWORK AND COMPLIANCE CHALLENGES IN DIGITAL PAYMENT:A CASE STUDY ON PAYTM

India is not only the world's largest independent democracy, but it is also a rapidly growing economic powerhouse. No country can have a stable economy without a sound and efficient banking system. Banks play a critical role in a country's economic growth. They collect people's unused savings and make them eligible for investment. They're in the process of granting loans and purchasing investment securities, new demand deposits are also established. Accepting and discounting bills of exchange allows for trade both within and outside the country. Banks also help to improve capital mobility. India's banking system has a long list of notable accomplishments over the last three decades. It is no longer limited to the cities, but has spread to even the most remote parts of the world. This is one of the factors behind India's development. The banking industry is now one of India's most important service industries. The availability of high-quality services is critical to the economy's success. Banks' attention has turned away from customer acquisition to customer retention. The introduction of Information Technology into the banking sector has changed the way people work. The banking sector's policy has undergone radical transformations, various customer-oriented products, such as internet banking, are available. Customer’s workload has been reduced mainly because of ATM providers, telebanking, and electronic payments. The internet's convenience Banking allows a customer to access and manage his bank account without 7 having to go to the bank. 'The Customer's options have been revolutionized by the availability of ATMs and credit/debit cards.

A STUDY ON FINANCIAL PERFORMANCE IN STATE BANK OF INDIA

This project titled "A Study on Financial Performance of SBI Bank" aims to analyze the financial performance of State Bank of India (SBI) using various financial ratios and balance sheet comparative. The study utilizes secondary data sources to examine the financial position, profitability, liquidity, solvency, and efficiency of SBI bank. The data for the study has been collected from the annual reports of the bank, as well as from various financial websites and publications. The study finds that SBI bank has maintained a stable financial position and has consistently improved its profitability over the years. The liquidity and solvency ratios of the bank also indicate a strong financial position. However, there is scope for improvement in the efficiency ratios of the bank. The findings of the study can be used by investors, analysts, and other stakeholders to make informed decisions regarding their investment in SBI bank. Keywords: financial performance, State Bank of India, financial ratios, profitability, liquidity, solvency, efficiency, balance sheet comparative, annual reports.

Income and balance sheet diversification effects on banks' cost and profit efficiency: Evidence from the United States

AbstractUsing two‐step system generalized method of moments approach, we provide empirical evidence on the impact of income, asset, and funding diversification on the cost and profit efficiency of US commercial banks from 2002 to 2019. Furthermore, we use two‐stage least squares to examine the interdependence between cost efficiency and profit efficiency. Our results show that funding and income (assets) diversification has a positive (detrimental) effect on the cost efficiency of banks, whereas funding (income and assets) diversification has a significantly negative (positive) effect on profit efficiency. Our findings reveal that during the global financial crisis, asset diversification is not beneficial for banks, whereas funding ‎diversification has a positive effect on cost and profit efficiency.‎ Our results confirm bidirectional causality between cost and profit efficiency in US commercial banks. Our mixed results on the influence of income, asset, and funding diversification on the cost and profit efficiency of banks with varying characteristics have useful implications for policymakers and regulators‎.