Does Electronic Banking Really Improve Bank Performance? Evidence in China

Abstract

This study investigated the performance of Chinese banks following the full adoption of e-banking system, particularly in profitability and cost efficiency performance. The study became more important with the development of e-banking and internet because of increased penetration of e-banking which has redefined the banking operations in China and in globe. Secondary method was adopted in this study. The report and data of five banks in China were used for sample analysis. The bank performance was measured in terms of return on assets (ROA), return on equity (ROE), operating margin (OM), net interest margin (NIM) and efficiency ratio. With the data collected, the different performance means between development stage and developed stage of e-banking in China were compared. The study revealed that e-banking could improve the Chinese bank performance in terms of ROA, ROE, and OM. On the contrary, e-banking has a slight impact on Chinese bank performance with respect to NIM and efficiency ratio. The findings of this study are to provide banks with suggestions for e-banking adoption for banking operations.