The Effect Of Digital Banking Technology On Bank Efficiency And Employee Demand In Indonesian Banking Industry

Abstract

This study analyze the effect of digital banking technology on banks efficiency and employee demand/recruitedin Indonesian banking industryandalso to study the impact of foreign shareholdings on technology adoption of the acquired local banks. The non-parametric DEA efficiency is utilized to measure bank efficiency and the ratio of IT-related cost to total bank operational cost is used as proxy of digital technology. The panel data regression model used banks efficiency scores based result of DEA analysis and ratio of IT related cost as dependent variables. Duration of the study is 2010-2020 with cross-section samples of all banks used in the DEA analysis. The sample used in this study is totally 29 Banks purposively selected based on the aggressiveness in utilizing digital banking technology which is assumed due to foreign shareholdings. It is concluded that higher digitization tends to increase efficiency but decrease number of employee demand /recruited. It is also found that higher portion of foreign shareholdings significantly increase magnitude of technology adoption in its acquired local banks. Results of this study will be used as reference for policy maker in shaping the future of efficiency and human resources of banking industry in Indonesia.
JEL Classifications: G21, L22, O33