DETERMINING FACTORS OF DIGITAL BANKING PROFITABILITY IN INDONESIA

• Main Author: Raditya Rahagi, Muhammad
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/86871
• Institution: Institut Teknologi Bandung

The digital banking industry in Indonesia has undergone a significant transformation, especially after the COVID-19 pandemic accelerated the adoption of digital financial services. This study investigates the impact of Loan to Deposit Ratio (LDR), Non-Performing Loan (NPL), and Capital Adequacy Ratio (CAR) on profitability, as measured by Return on Assets (ROA). Data analysis was conducted using Structural Equation Modeling - Partial Least Squares (SEM-PLS) based on financial data covering the period 2021 to Q3 2024. The results show that LDR has a positive and significant effect on ROA, emphasizing the role of an effective lending strategy in increasing profitability. In contrast, NPL and CAR show an insignificant effect on ROA, indicating that their effects can be moderated by risk management practices and capital efficiency. These results highlight the importance of improving lending policies, strengthening risk mitigation, and optimizing capital utilization to maintain sustainable profitability in digital banking. This study offers practical insights for digital banks to improve their financial performance by focusing on optimizing LDR, improving credit scoring systems, and managing liquidity effectively. Recommendations include prioritizing SME lending, leveraging AI-based risk assessment tools, and diversifying revenue streams. Furthermore, the study makes theoretical contributions to banking profitability models and offers strategic direction for policymakers and financial institutions navigating the evolving digital banking landscape.