Interaction Between Internet Banking and Bank Performance: The Case of Europe

Abstract

In this study, the interaction between internet banking and bank performance is investigated by panel causality tests. Banking data of 30 European countries analyzed by Demitrescu -Hurlin panel causality test for the period 2005-2013. ROA and ROE ratios were used as measures of bank performance. Not only whole sample consisting of Euro Area and the others but also Euro Area and the other countries in Europe considered as samples and tested two sub-samples. Results show that a strong relationship through internet banking to the bank performance in the Euro Area countries and for the rest of the Euro Area countries are also not determined causation significantly in both directions. On the other hand, there is also a significant relationship internet banking to performance of the bank considering the whole sample.

Possibilities for Financial Technology Sector Development and its Impact on Banking Sector Profitability in Lithuania

“…(2) For the purpose of assessing the impact of certain developments on the banking sector, researchers often use a correlation (Larionova et al, 2014, Jasevičienė et al, 2013, Biswas et al, 2018, Bikker, 2010 and regression analysis (Milič et al, 2017, Tunay et al, 2015. Furthermore, most frequently for analyzing the impact of financial technologies on banks, researchers use the correlation-regression analysis method (DeYoung, 2005, Mwaura et al, 2016, Mustapha, 2015, Mansilla-Fernandez, 2017, Tunay et al, 2015, Shah et al, 2014. For the purpose of the present paper, the impact of the FinTech sector on the banking sector in Lithuania was assessed using the correlation and multidimensional linear regression analysis.…”

“…For the purpose of the present paper, the impact of the FinTech sector on the banking sector in Lithuania was assessed using the correlation and multidimensional linear regression analysis. An overview of the research in the area concerned (DeYoung, 2005, Cyree et al, 2009, Bikker, 2010, Yen, 2013, Shah et al, 2014, Trivedi, 2015, Tunay et al, 2015. Kagan et al, 2005, Bektas, 2014 concluded that the key indicators used to evaluate the profitability in the banking sector are return on equity (ROE), return on assets (ROA) and the net interest margin (NIM).…”

“…DeYoung 2005, Kagan et al (2005), and Tunay et al (2015) concluded that the introduction of internet banking increased the profitability of banks. However, DeYoung (2005) noted that for banks it will be more reasonable to maintain service provision in both traditional banks and the online space rather than fully relocating to the cyber space, as customer preferences for different channels will remain.…”

“…Although the majority of the research papers on the topic of FinTech is theoretical, rather than empiric in nature (Blach, 2011, Arner et al, 2015, Vaškelaitis, 2010, Dorfleitner et al, 2017, Puschmann, 2016, Schindler, 2016, Walker, 2017, Kalmykova et al, 2015,they provide definitions of financial technologies, define the development stages and operating models, analyze the existing regulations and the impact of technologies, and emergence of risks; however, in view of the further development of the FinTech sector, other areas have also attracted the interest of researchers (Kagan et al, 2005;DeYoung, 2005;Cyree et al, 2009;Trivedi, 2015, Tunay et al, 2015Yen, 2013, Heffernan et al, 2008Buss et al, 2017;Bratasanu, 2017;Mwaura et al, 2016;Levišauskaitė, 2004;Vargas, 2008;Gimpel, 2015;Lee et., 2017;Mansilla-Fernandez, 2017), focusing more on the level of FinTech development of the country, the impact of the sector upon the national economy, the financial sector, or the possibilities of further development of the FinTech sector. For instance, Vargas (2008) found that banks employ financial technologies to a lesser extent than FinTech companies, but their role remains important and banks are likely to increase the use of financial technologies in the future.…”

“…DeYoung (2005), Kagan et al (2005) have reported a wider applicability of technologies and the development of new channels for provision of financial services as adding to increase the profit margins of banks. On the other hand, there is evidence that in some countries technological changes can bring down the profits of banks (Tunay et al, 2015, Titko et al, 2015, or will affect their performance to only a marginal extent. In response to emergence of FinTech, banks seek to ECONOMICS AND CULTURE 16(1), 2019 DOI: 10.2478/jec-2019-0002 DOI: 10.1515/jec-2016-0014 improve the financial services they provide, and, in particular, in view of the new competitors emerging in the financial sector that can negatively affect the profitability of banks ((Lee et al, 2017, Dabrowski, 2017, Lévy-Bencheton, 2016.…”