Digital Transformation of Banking in Improving Efficiency: A Study on Indonesian Digital Banks (Management Analysis Journal)

Summary

• The study analyzes secondary financial data from 5 Indonesian digital banks across the 2018–2025 period using a panel ARDL model.p.1
• Digital banks in Indonesia maintain high capital adequacy levels exceeding the minimum regulatory requirement of 8%.p.3
• Average Data Envelopment Analysis efficiency scores for the banks increased from 0.701 during 2018–2021 to 0.857 during 2022–2025.p.5
• Panel unit root tests confirm that efficiency is stationary at level I(0) with an LLC test probability of 0.0017.p.5
• The short-run error correction coefficient COINTEQ is -0.4374, showing adjustment back to long-term equilibrium at a rate of 43.7% per period.p.6

Key insights

1. Digital transformation has no significant effect on Indonesian digital bank efficiency in the short term but exerts a positive and significant effect in the long term.p.1
2. Pre-transformation investment costs in technology infrastructure, digital outsourcing, talent, and branding temporarily depress bank operational efficiency.p.5
3. The average efficiency score of digital banks improved from 0.701 before transformation to 0.857 after transformation.p.5
4. Capital Adequacy Ratio has a positive but statistically insignificant impact on bank efficiency in both short-term and long-term periods.p.6
5. Long-term inflation exhibits a statistically significant negative effect on digital bank efficiency performance.p.6
6. Short-term deviations from long-term efficiency equilibrium adjust at a speed of approximately 6-7 months.p.6