A comparative study of banking financial performance before and after the bank digitalization in Indonesia
List of Authors
  • Akbar Triazriel Ramadhan , Oktofa Yudha Sudrajad

Keyword
  • Digitalization, Digital Bank, Bank Financial Performance, Difference-in-Differences

Abstract
  • In recent years digital banks' presence has become increasingly widespread in Indonesia. Digital banking has become one of the most essential and modern innovations. This innovation aims to improve the efficiency and quality of bank operations. This strategy raises the question of whether the digitalization strategy carried out by banks has a significant positive effect on bank financial performance. This study uses the Difference-in-Differences method, where digitalized Banks are the Treatment Group and non-digitalized Banks are Control Groups. Bank digitalization is not carried out simultaneously, and it indirectly creates an ideal treatment and control group for conducting impact evaluation research. This study uses 3 banks that have adopt digitalization as treatment group and 12 commercial banks that are part of the Bank Group based on Core Capital (KBMI) 2 and 3 as control group. The empirical analysis was performed on a data panel of 15 KBMI 2 and KBMI 3 banks' financial performance. The observation period of pre-treatment is from 2012 to 2015, and post-treatment is from 2018 to 2021. The results of this study found that the bank's financial performance significantly did not increase after digitalization. The results of this study can be used as a source of information for banks in Indonesia to consider digitalization strategy to increase banking financial performance.

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