E-Banking Impact on the Profit Margin of Banks in Iran

Development of e-banking has empirically modified the structure and characters of banks’ performance, efficiency, risk and challenges which have also been articulately recognized based on the international best practices. E-banking brazenly accelerates and restructures financial transactions via enhancing technology and expanding the banking services in comparison with conventional banking. Accordingly, online access to the banks’ products, financial statements, payment services and even credit scoring has considerably improved banks-customers relationships in the context of lending and borrowing practice, deposit composition, investment opportunities, trade finance options as well as account management diversification. The impact of recent e-banking developments is statistically evaluated for Iran’s banking network via Dynamic Panel Data approach. The findings highlight that the ratio of ATMs and Electronic Cards transactions to banks' assets negatively-significantly influence the profitability due to higher substitution ratio with the other payment instruments and maintenance cost. The ratio of online branch transactions to the banks' assets negatively-insignificantly affects the profitability owing to the rapid increase in the NPLs and loan/loss expenses which has consequently shrunk Shared Revenues over the past 10 years. SWIFT-branches have positively-significantly enhanced the banks internal-secured cash flow while contemporaneously improves fund efficiency, banks’ services fees, and ultimately profit margin.