RELATION OF DIGITAL BANKING GROWTH TO THE PERFORMANCE OF CONVENTIONAL BANK

• Main Author: Akbar Adiva, Aufa
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/77309
• Institution: Institut Teknologi Bandung

The French banking ecosystem is continuously evolving in the age of digitalization. This phenomenon has made an impact in revolutionizing the banking industry where there is an increase in the digital banking service demand. Boursorama, one of the leaders of the digital banking sector in France, have experienced an increase of 230.25% in their customers over the year 2015 until 2021 based on the data available on Statista. One of the root causes of why people in France are choosing digital banks over conventional ones is the account opening process. Where to open a conventional bank account one’s needs several days until their account could be utilized while a digital bank most of the time could be put to use in an instant after registering an account. In addition to that, the requirement to open a conventional bank account requires the customers to be present physically, and sometimes, customers are required to bring documents which for a new resident or a foreigner they might have not their hand on it yet. On the other hand, opening a digital bank account could be done digitally with an easier flow to follow. Hence, making it more appealing for customers with a limited time to choose a digital bank rather than a conventional bank. Big conventional banks like Crédit Agricole, Société Générale, and BNP Paribas are some of the many players in the financial service sector that are impacted by this growth. There has been an increase in the percentage of customers that switched their bank in France from 2.5% in 2014 to 5.5% in 2019. Change like this would lead to financial consequences for the conventional bank and would lead to more damage if traditional banks do not divert their strategy as well. This situation where digital bank increases the competition in the banking industry is also added by the increase in exposure to risk on the conventional banks despite restructuring program that has been done on accounting standards such as Basel I and Basel II. This research discusses the relationship between the digital banking industry's growth and conventional banking performance in France. This study aims to discover if there is any influence that the digital banking industry growth has on conventional banks. This study fills the gap of the previous research that has been conducted which is to investigate the event over a longer period but still limited to measurement variables used and the 16 years time frame. The methodology utilized for this research is quantitative using the linear regression method which resulted in the discovery that the digital banking penetration rate, the measurement used for the growth of the digital banking sector, has a relatively weak positive relation with France’s conventional bank's performance while it has a moderately negative relationship when year is included to control the regression. Conventional banks should focus on their digital transformation to keep up with the competition. To collect more comprehensive findings, further research should include more variables as the key financial measurement over a long period.