The correlation of cashless banking and profitability in the banking industry in Bangladesh

Published: Mar 1, 2024

Abstract:

Purpose: Cashless banking is an innovative banking policy that is gaining prominence in today's digital era of technological advancement. This study investigates the correlation between profitability of the banking sector and adoption of cashless banking in Bangladesh.

Research Methodology: The profitability of the cashless banking industry in Bangladesh was measured using Return on Equity (ROE) and Return on Assets (ROA). Profitability is determined by the transaction volume of Mobile Financial Services (MFS), Automated Teller Machines (ATMs), bit cards, and internet banking fund transfers (IBFT). This study uses a multiple regression approach to analyze the association between a bank's profitability and cashless banking. The data used in this analysis were collected from the annual reports of the Central Bank of Bangladesh over a seven-year period.

Results: The findings indicate that IBFT has a notable favorable influence on return on equity (ROE), whereas ATM and debit cards have major adverse impacts on ROE. Additionally, mobile financial services (MFS) and IBFT have a positive effect on return on assets (ROA), but debit cards have a negative effect on ROA in Bangladesh’s banking business. The data indicate that nearly all the components have either a positive or negative influence on ROA or ROE.

Contribution: However, only IBFT has a positive and substantial influence on ROA and ROE. The results of this study have moderate importance for the regulatory bodies and stakeholders of both banks and non-bank financial firms as well as for academics and the government as a whole.

Keywords:
1. E-Banking
2. Cashless Transactions
3. Digital Payment System
4. Banking Industry of Bangladesh
5. Paperless Economy
Authors:
1 . Moutusi Tanha
University of Canterbury, Christchurch, New Zealand
2 . Md. Karimul Alam
University of Dhaka, Bangladesh
https://orcid.org/0009-0001-7934-3115
3 . Sultan Mahmud
University of Dhaka, Bangladesh
https://orcid.org/0009-0001-5449-6801
4 . Shahadat Hossain
University of Dhaka, Bangladesh
https://orcid.org/0009-0002-3418-2503
5 . Murshed Alam
University of Dhaka, Bangladesh
https://orcid.org/0009-0002-7095-3360
6 . Md. Al Sabahel
University of Dhaka, Bangladesh
https://orcid.org/0009-0001-6512-8502
View PDF
How to Cite
Tanha, M., Alam, M. K., Mahmud, S., Hossain, S., Alam, M., & Sabahel, M. A. (2024). The correlation of cashless banking and profitability in the banking industry in Bangladesh. Annals of Management and Organization Research, 5(3), 175–188. Retrieved from https://goodwoodpub.com/index.php/amor/article/view/1864
Download Citation
  1. Endnote/Zotero/Mendeley (RIS)
  2. BibTeX

Downloads

Download data is not yet available.
Issue & Section
Vol. 5 No. 3 (2024): February
Articles
Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

References

    Abbas, A. E. (2017). Literature review of a cashless society in Indonesia: evaluating the progress. International Journal of Innovation, Management and Technology, 8(3), 193-196.

    Abdullah, N., Redzuan, F., & Daud, N. A. (2020). E-wallet: Factors influencing user acceptance towards cashless society in Malaysia among public universities. Indonesian Journal of Electrical Engineering and Computer Science, 20(1), 67-74.

    Abubakar, A. H., Ibrahim, B. Y., Zakaria, N. N. B., & Kassim, S. F. B. M. (2023). Board attributes, risk management and financial performance: Insights from Iraq. Annals of Management and Organization Research, 5(2), 115-126.

    Achord, S., Chan, J., Nardani, S., & Rochemont, S. (2017). A Cashless Society-Benefits, Risks and Issues. London: Institute and Faculty of Actuaries. Search in.

    Berkimbayeva, A. (2019). Transition to a Cashless Society: Impact on Economic Activity.

    Boubacar, A. I., & Bans-Akutey, A. (2023). Influence of banking regulation and supervision on banks’ performance. Annals of Management and Organization Research, 5(2), 99-113.

    Chike, N. K., Mbamalu, E. I., Oguanobi, C. A., & Egbunike, C. F. (2023). Big Data Analytics and market competitiveness of selected firms in Lagos State, Nigeria. Annals of Management and Organization Research, 4(4), 251-269.

    Datta, R. K. (2021). Relationship between Cashless Banking and Bank’s Profitability of Bangladesh. International Journal of Science and Business, 5(7), 21-32.

    Fabris, N. (2019). Cashless society–the future of money or a utopia. Journal of Central Banking Theory and Practice, 8(1), 53-66.

    Fachrudin, K. A., & Silalahi, A. S. (2022). A Study of the Use of Cashless Payments in Relation to Income, Financial Behavior, and Almsgiving Behavior in Sumatera, Indonesia. Paper presented at the Second International Conference on Public Policy, Social Computing and Development (ICOPOSDEV 2021).

    Hidayah, N., Waspada, I., & Sari, M. (2023). The Dynamics Of Cashless Society: A Systematic Review. Advanced International Journal of Business, Entrepreneurship and SMEs, 5(15).

    Indrajaya, N., Perizade, B., Wahab, Z., & Shihab, M. S. (2023). Mediating role of attitude in green purchase intention for solar power plants: A green marketing analysis. Annals of Management and Organization Research, 5(2), 127–141.

    Katahama, Z., & Bozorgzadeh, T. (2023). Examining employer experiences in the polytechnic sector's industrial training program. Annals of Management and Organization Research, 5(2), 143-161.

    Lai, P. C., & Liew, E. J. (2021). Towards a cashless society: The effects of perceived convenience and security on gamified mobile payment platform adoption. Australasian Journal of Information Systems, 25.

    Ong, H.-B., & Chong, L.-L. (2023). The effect of cashless payments on the internet and mobile banking. Journal of Financial Services Marketing, 28(1), 178-188.

    Ravi, P. (2018). A Study Of Cashless System And Cashless Society: Its Advantages And Disadvantages. Indian Journal of Applied Research.

    Rozanna, M. (2023). What is strategic management research? Annals of Management and Organization Research, 4(4), 271-280.

    Sharif, M., & Pal, R. (2020). Moving from cash to cashless: A study of consumer perception towards digital transactions. PRAGATI: Journal of Indian Economy, 7(1), 1-13.

    Srouji, J., & Torre, D. (2022). The global pandemic, laboratory of the cashless economy? International Journal of Financial Studies, 10(4), 109.

    Tanha, M., Siddique, M. A., Sumon, M. M. I., Nurulhoque, M., Sazin, R., & Hossain, P. (2023). Cash Recycling Machine (CRM) & its impact on customer satisfaction: A study on UCB PLC. Annals of Management and Organization Research, 5(2), 72-97.

    Uddin, M. S., & Akhi, A. Y. (2014). E-wallet system for Bangladesh an electronic payment system. International Journal of Modeling and Optimization, 4(3), 216.

  1. Abbas, A. E. (2017). Literature review of a cashless society in Indonesia: evaluating the progress. International Journal of Innovation, Management and Technology, 8(3), 193-196.
  2. Abdullah, N., Redzuan, F., & Daud, N. A. (2020). E-wallet: Factors influencing user acceptance towards cashless society in Malaysia among public universities. Indonesian Journal of Electrical Engineering and Computer Science, 20(1), 67-74.
  3. Abubakar, A. H., Ibrahim, B. Y., Zakaria, N. N. B., & Kassim, S. F. B. M. (2023). Board attributes, risk management and financial performance: Insights from Iraq. Annals of Management and Organization Research, 5(2), 115-126.
  4. Achord, S., Chan, J., Nardani, S., & Rochemont, S. (2017). A Cashless Society-Benefits, Risks and Issues. London: Institute and Faculty of Actuaries. Search in.
  5. Berkimbayeva, A. (2019). Transition to a Cashless Society: Impact on Economic Activity.
  6. Boubacar, A. I., & Bans-Akutey, A. (2023). Influence of banking regulation and supervision on banks’ performance. Annals of Management and Organization Research, 5(2), 99-113.
  7. Chike, N. K., Mbamalu, E. I., Oguanobi, C. A., & Egbunike, C. F. (2023). Big Data Analytics and market competitiveness of selected firms in Lagos State, Nigeria. Annals of Management and Organization Research, 4(4), 251-269.
  8. Datta, R. K. (2021). Relationship between Cashless Banking and Bank’s Profitability of Bangladesh. International Journal of Science and Business, 5(7), 21-32.
  9. Fabris, N. (2019). Cashless society–the future of money or a utopia. Journal of Central Banking Theory and Practice, 8(1), 53-66.
  10. Fachrudin, K. A., & Silalahi, A. S. (2022). A Study of the Use of Cashless Payments in Relation to Income, Financial Behavior, and Almsgiving Behavior in Sumatera, Indonesia. Paper presented at the Second International Conference on Public Policy, Social Computing and Development (ICOPOSDEV 2021).
  11. Hidayah, N., Waspada, I., & Sari, M. (2023). The Dynamics Of Cashless Society: A Systematic Review. Advanced International Journal of Business, Entrepreneurship and SMEs, 5(15).
  12. Indrajaya, N., Perizade, B., Wahab, Z., & Shihab, M. S. (2023). Mediating role of attitude in green purchase intention for solar power plants: A green marketing analysis. Annals of Management and Organization Research, 5(2), 127–141.
  13. Katahama, Z., & Bozorgzadeh, T. (2023). Examining employer experiences in the polytechnic sector's industrial training program. Annals of Management and Organization Research, 5(2), 143-161.
  14. Lai, P. C., & Liew, E. J. (2021). Towards a cashless society: The effects of perceived convenience and security on gamified mobile payment platform adoption. Australasian Journal of Information Systems, 25.
  15. Ong, H.-B., & Chong, L.-L. (2023). The effect of cashless payments on the internet and mobile banking. Journal of Financial Services Marketing, 28(1), 178-188.
  16. Ravi, P. (2018). A Study Of Cashless System And Cashless Society: Its Advantages And Disadvantages. Indian Journal of Applied Research.
  17. Rozanna, M. (2023). What is strategic management research? Annals of Management and Organization Research, 4(4), 271-280.
  18. Sharif, M., & Pal, R. (2020). Moving from cash to cashless: A study of consumer perception towards digital transactions. PRAGATI: Journal of Indian Economy, 7(1), 1-13.
  19. Srouji, J., & Torre, D. (2022). The global pandemic, laboratory of the cashless economy? International Journal of Financial Studies, 10(4), 109.
  20. Tanha, M., Siddique, M. A., Sumon, M. M. I., Nurulhoque, M., Sazin, R., & Hossain, P. (2023). Cash Recycling Machine (CRM) & its impact on customer satisfaction: A study on UCB PLC. Annals of Management and Organization Research, 5(2), 72-97.
  21. Uddin, M. S., & Akhi, A. Y. (2014). E-wallet system for Bangladesh an electronic payment system. International Journal of Modeling and Optimization, 4(3), 216.