E-Banking and Financial Performance of the Domestic Commercial Banks in Sri Lanka

Abstract

Advancement of the Information and Communication Technology (ICT) and rapid increase in the usage of ICT in financial markets all over the world can be identified as one of the main reasons behind increased complexity and competition in financial markets today. Sri Lankan banks also have adopted E-banking to deliver their services for a few decades. However, only a limited number of studies have been conducted in the Sri Lankan context to identify the impact of E-banking on the profitability of banks in Sri Lanka. The main objectives of the study are to investigate the effect of E-banking on financial performance and to examine whether the degree of the firm size affects the financial performance of commercial banks in Sri Lanka. To investigate the impact of E-banking on the financial performance of the commercial banks in Sri Lanka, this study has been selected twelve domestic commercial banks in Sri Lanka as the sample and the data has been gathered over the period of 2012 to 2017 based on the published annual reports of selected banks. Further, to assess the impact of E-banking on bank performance, this study observed the Return on Assets (ROA) as the dependent variable and E-banking as the independent variable. Distribution of ATM network and fee and commission income of each bank has been selected as indicators of E-banking. Size of the bank has been considered as the controlled variable of this study which has been indicated by the total assets and number of branches. This study has used the regression model to investigate the impact of E-banking on bank financial performance and it was found that E-banking had a significant positive impact on the financial performance of commercial banks by number of ATMs, net fee and commission income and the number of branches. Only the total assets showed a significant negative impact on the financial performance of banks.