Changes in financial performance of traditional intermediatries for financial innovation

Abstract

The purpose of this thesis is to examine the impact of digital bank deposit, asset and loan growth on selected traditional bank performance measures. In order to estimate whether a causal relationship between digital bank measures and traditional bank performance exists, Granger causality method is selected as the main empirical model. In addition, to determine the direction and strength of said relationship, OLS regressions are performed. Research results lead to the conclusion that digital bank deposit and loan growth have a causal relationship to traditional bank performance ratios. Deposit growth has a negative impact on traditional bank performance ratios and loan growth shows both positive and negative impact on different ratios. This research demonstrates some of the challenges that traditional banks are facing in the age of innovation.