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Unraveling the Nexus between Digital Banking Transactions and Bank Profitability: Insights From Turkey’s Deposit Banks

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  • Bekir Zengin

    (Tarsus University, Mersin, Turkey)

Abstract

This study estimates the relationship between digital banking transactions and bank net profit through regression analysis using the data of deposit banks in Turkey between 2011 and 2021. The data from 11 Turkish banks are analyzed with the least squares method (OLS) in the Stata package program. For this purpose, the relationship between digital banking transactions and bank net profit is estimated by constructing three models. In the first model, online banking transactions have a positive effect on bank profitability. The number of internet banking customers, the number of Automated Teller Machine (ATM), and the number of Point of Sale (POS) are found to have a negative effect on net profit, but these coefficients are not statistically significant. In the second model, mobile banking transactions have a positive effect on bank net profit. ATM has a positive and statistically significant effect on bank net profit, while the number of POS has a negative coefficient on bank net profit, but this coefficient is not statistically significant. In the third and last model, the digital banking transactions have a positive effect on the net profit of the bank. ATM and POS numbers have a negative effect on bank net profit, but these coefficients are not statistically significant. In conclusion, both internet and mobile banking transactions have a positive effect on bank profits in Turkey. Digital banking transaction, which is a combination of internet and mobile banking transactions, is also found to have a positive effect on bank profits. Additionally, it has been revealed that internet banking services contribute more to bank profits than both mobile and digital banking services.

Suggested Citation

  • Bekir Zengin, 2024. "Unraveling the Nexus between Digital Banking Transactions and Bank Profitability: Insights From Turkey’s Deposit Banks," Journal of Financial Studies, Institute of Financial Studies, vol. 16(9), pages 236-248, May.
    • Handle: RePEc:fst:rfsisf:v:16:y:2024:i:9:p:236-248
    DOI: 10.55654/JFS.2024.9.16.14
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    References listed on IDEAS

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    5. Imlak Shaikh & Mohd Anwar, 2023. "Digital bank transactions and performance of the Indian banking sector," Applied Economics, Taylor & Francis Journals, vol. 55(8), pages 839-852, February.
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    More about this item

    Keywords

    Digital banking; Internet Banking; Mobile Banking; Net Profit.;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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