The effects of electronic banking development on Iranian banks’ profitability (2005-2010)

Abstract

In this research, it has been attempted to answer what effects electronic banking development has had on Iranian banks’ profitability.  This research is based on analyzing Iranian Banks activities in Electronic Banking development during several years. Regarding the fact that the most serious actions in the field of e-banking in Iran are installing ATMs, various e-banking services (by telephone, internet, and cell phone), issuing different e-cards (debit card, credit card, purchase/gift card, and e-money), and installing sales terminals and branch terminals, the issue which was pointed out in the present study  was the effect of each of the mentioned parameters and equipment on Iranian banks’ profitability. The model used in this research is based on the structure-behavior-action hypothesis in which the Return on Assets (ROA) is considered as the dependant variables and the number of cards to ATMs ratio, facilities to the number of branches ratio, Herfindahl- Hirschman Index (HHI), inflammation rate, and both the virtual variables including business and government aspects of banks or their being private and specialized were defined as independent variables. The model estimation was performed through 17 banks data during the years 2005 to 2010 and based on the panel data method. The research results show that number of cards to ATM ratio increase has a positive and meaningful effect on banks profitability. Based on this, it can be concluded that Electronic Banking development has a positive and considerable effect on Iranian banks profitability. Also, the number of loans, and given facilities have positive and meaningful effects on Iranian banks profitability.