Determinants of Bank Competitiveness in Digital Era A Case Study of South Korea
Determinants of Bank Competitiveness in Digital Era A Case Study of South Korea

Summary/Abstract: Technical innovations in Digital Era provide the incentives for banks to redesign their businessoperations to enhance their competitiveness. Prior studies use financial indicator as factorsthat affect bank competitiveness, however, with the technology advancement, InformationCommunication Technology (ICT) become major factors in assessing banks’ competitiveness.The aim of this study is to analyze specific ICT factors, as well as financial factors, affecting bankcompetitiveness. This study examines all 17 commercial banks in South Korea. The ICT factorsare measured by IT center operation and IT scandal released in news or mass media while thebank competitiveness is proxied by market share of each bank both in the borrowing and lendingmarket. In addition, the study tests to retrospect financial indicators in comparison with ICTfactors. Using OLS regression models, this study finds that, in the case of Korean commercialbanks, ICT factors plays an importance role in bank competitiveness, however, the financialfactors still have greater influences on market share than ICT factors. The implication is thatbanks should leverage the ICT innovation since there is a surge of ICT based non-bank financialservice providers that have started to assume roles that have been traditionally played by banks.Furthermore, this study raises implications for policy makers to consider ICT security regulationsin the banking market. This study contributes to the literatures by supporting the fact that thepositive relationship between IT scandals and market share suggests implications to concentratedbanking sectors and provides alarming with authority’s monitoring system.

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