The evolution of technology in banking and its impact on EU banks’ profitability

Abstract

This reading will look at how banks evolved throughout the years in relation to online banking from credit cards, ATMs, electronic cash, etc., and the new innovations in the banking sector. For the purpose of this study, a quantitative approach will be applied to a secondary panel dataset to examine the impact of technology innovation on the banks’ performance. This study will analyse 28 European countries from 1997 to 2017. The performance indicators of interest to the report (dependent variables) consist of Return on Assets (ROA) and Return on Equity (ROE). The explanatory variables gathered are Fixed Telephone Subscriptions, Individuals using the Internet, Mobile Cellular Subscriptions, Banking Crisis as a dummy variable, Bank Z-Score, Number of Branches and Number of Employees. The findings indicate that not all variables are statistically significant in both models used for predictive analysis of ROA and ROE. The results of these measurements indicated that the Z-Score variable and the Banking Crisis dummy left an impact on banks’ performance for a good number of EU countries. While the Mobile Cellular Subscriptions came insignificant for all countries in both models.