Do banks enjoy technology under competitive pressures? Cross-country evidence

Summary, in English

Financial institutions have focused on technology to enhance efficiency and reduce operating costs. We argue that due to competitive pressures, banks may not benefit from these technological investments, which may incur an extra charge to the bank. This research examines if being technologically advanced increases banks’ financial performance in a competitive market. The contribution of this study is threefold; it examines, first; the impact of technology adaptation on financial performance, second; the effect of bank competition on banks’ financial performance and third; we integrate the theories on tech-performance nexus and competition-performance nexus and examine if competition impacts the relationship between technology and financial performance. The findings suggest that technology enhances banks’ financial performance, and competition makes banks fragile, supporting the competition-fragility theory. Moreover, the results on the impact of competition on the tech-performance nexus suggest that banks only benefit from investments in technology under low or moderate levels of market competition and that under highly competitive pressures, technology might not bring that extra competitive advantage to banks. With the said empirical evidence, it becomes clear how important technology can be for banks. The study carries vital policy insights for regulators and practitioners.

• Author: Mudeer Ahmed Khattak; Fawad Ahmad; Noureen A. Khan
• Publishing year: 2022
• Language: English
• Pages: 2430-2445
• Publication/Series: Technology Analysis and Strategic Management
• Volume: 36
• Issue: 10
• Links: http://dx.doi.org/10.1080/09537325.2022.2147423
• Document type: Journal article
• Publisher: Routledge
• Topic: Business Administration
• Status: Published
• ISBN/ISSN/Other: ISSN: 0953-7325