Factors Influencing Digital Bank Performance

Abstract

Implementation of information technologies has led to the concept of the digital economy which is based on the use of the most advanced innovations. Digital transformation is realized in every economic sector including the banking sector. Nowadays, banking is one of the most important sectors which introduce and use the latest achievements in the field of information and communication technologies. Despite the increasing relevance of digitalization, surprisingly little is known about the determinants of digital banks performance. This paper attempts to fill this gap by evaluating the link between inner factors and bank performance in Russia. We use regression models on the dataset of 16 digital banks. Performance of digital banks is measured by return on assets in 2018. The results show that digital banks which have more customers and more transactions through digital communication, have higher performance. Our results remain rather inconclusive with respect to a share of loans and deposits through remote banking. These results imply that the identified inner factors of a digital bank play an important role while contributing to its success.