Mouwafac Sidaoui, Faten Ben Bouheni, Zandanbal Arslankhuyag and Samuele Mian
The purpose of this study is to evaluate the global developments in the area of fintech solutions by analyzing Islamic and Conventional banks core accounting and market analysis…
Abstract
Purpose
The purpose of this study is to evaluate the global developments in the area of fintech solutions by analyzing Islamic and Conventional banks core accounting and market analysis IFIs and their impact on financial inclusion within its core markets.
Design/methodology/approach
The authors collect and analyze annual accounting and market Data of the top ten largest Islamic banks and the top ten US Conventional banks, in terms of Total Asset and Market Capitalization, from Bloomberg Data.
Findings
The analysis of Bloomberg data shows higher risk-return for Islamic banks–except ROE Market measure that we suggest-than US conventional banks. Nonetheless, Islamic banking grew faster than conventional banking over the period 2006–2021. As a business model, we find that Islamic banks take more credit with more than seventy percent of their profit from loans, while US conventional banks struggle to reach seventy percent interest rate ratio. The authors’ research documents that Fintech and digitalization are driving Islamic finance growth during financial and economic downturns.
Research limitations/implications
FinTech data is not available for banks, further insights of analysis on FinTech and Innovations in the banking sectors.
Practical implications
Islamic banks continuously innovate to satisfy the users of their services and Fintech is opportune to innovation. This study could be interesting for both practitioners and academics wishing to understand and compare Islamic and conventional banking futures.
Social implications
The authors compared two banking systems, the US and Islamic Banks, which could be useful for users to differentiate between those banking operations.
Originality/value
The authors collected accounting and market data from Bloomberg of top 10 Islamic and top 10 US Conventional banks from 2006 to 2021 to examine Risk-Return, Growth and Business Model of those banks. The authors propose a new Risk-Return measure ROE-Market and its volatility.
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Faten Ben Bouheni, Mouwafac Sidaoui, Dima Leshchinskii, Bryan Zaremba and Mousa Albashrawi
The purpose of this study is to investigate how the implementation of digital banking services (mobile applications) by globally systemically important banks (G-SIBs) affects…
Abstract
Purpose
The purpose of this study is to investigate how the implementation of digital banking services (mobile applications) by globally systemically important banks (G-SIBs) affects banks’ performance in the USA and Europe from 2005 to 2022.
Design/methodology/approach
The study employs advanced econometric methods to analyze the link between deposits and banking performance, utilizing linear regressions and multivariate Bayesian regressions.
Findings
Our results indicate that customer deposits positively impact a bank’s performance after the introduction of the mobile application feature of check deposits, whereas social risk negatively impacts banking financial performance. These findings support the hypothesis that technology implementation improves the profitability and growth of traditional banks.
Research limitations/implications
While findings are robust econometrically in linear and Bayesian regressions, variables reflecting the digitalization of banks remain limited. For instance, the number of mobile users or the volume of digital transactions per bank since the implementation of the mobile app is not available.
Practical implications
In a rapidly growing technology and constantly changing customers behaviors, this research has practical implications from bankers’ perspective to continue the technological innovation efforts and from regulators’ perspective to strengthen requirements for the digital banking services.
Social implications
We provide empirical evidence that including a banking app for smartphones’ users for remote banking services benefit the financial performance of banks. However, the social risk remains significant for banks in terms of customers' satisfaction, data privacy and cybersecurity.
Originality/value
This paper employs an innovative approach to create a mobile app “discriminatory” factor and examine the relationship between deposits and banks’ performance before and after the introduction of a mobile app for too-big-to-fail banks in Europe and the USA. Additionally, we consider the social risk component of the ESG score, as a bank’s decision to implement mobile applications and technology for its customers potentially affects social risks associated with customer satisfaction and technology usability.
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Faten Ben Bouheni, Manish Tewari, Mouwafac Sidaoui and Amir Hasnaoui
This study aims to develop a unique methodology to construct a bank’s financial technology (Fintech) score, which captures the degree of digitalization of a bank’s operations…
Abstract
Purpose
This study aims to develop a unique methodology to construct a bank’s financial technology (Fintech) score, which captures the degree of digitalization of a bank’s operations. Using the Fintech score as the proxy, this study investigates the effect of Fintech on the operating performance of the top largest Islamic bank.
Design/methodology/approach
The methodology used measures the link between the degree of digitization of a bank and its operational performance. This study applies the three-degree polynomial of regression to the largest Islamic bank in which the explanatory variable is the natural logarithm of Fintech score, and the response variable is common operating performance measure. To check the sensitivity of the estimates to the sample size and assumptions’ violation, this study has applied Bootstrapping and Bayesian processes to the three-degree polynomial regressions.
Findings
The study estimates from 2007 to 2021 show that the relationship between the operating performance of the Islamic banks and the Fintech is nonlinear and strongly significant: operating returns increase with the increasing level of Fintech, whereas the operating returns decrease with the increasing Fintech variance. At an aggregate level, this study attributes a significant rise in internet coverage to the emergence of Fintech in the Middle East region.
Originality/value
This study constructs an implicit measure of Fintech that measures the adoption of Fintech by the bank and, consequently, offers the technology to their customers for higher use satisfaction. This study finds that Fintech is linked to the operating performance in a nonlinear fashion, in which Fintech and Fintech variance have the opposite effect on operating performance: Fintech increases the operating profitability, whereas Fintech variance decreases the operating profitability of a bank.