Abstract:
The study examines the relationship between information technology development (ITD) and bank sector development using Generalized Method of Moments (GMM) approach based on Ordinary Least Squares (OLS) technique and time series annual data over the period between
2000 and 2014. The GMM version is superior over OLS technique because it adequately control for endogeneity problems that allows past performance (or development)of the banking sector adjust to ICT variables. ITD is measured by four indexes: mobile (cellular ) telephone subscriptions (MTS), fixed-telephone subscriptions (FTS), total mobile and fixed telephone subscriptions (MFTS), and percentage of individuals using the internet (PINT) whilst banking sector development is measured by three indicators: broad money supply (MS2), bank deposit liabilities (BDL) and private sector credit (PSC). Based on the empirical results, evidence shows that MS2, BDL and PSC had positive relationship with MTS, FTS, MFTS and PINT. In addition, the correlation results revealed a strong positive association between development in information technology and banking sector growth. In conclusion, in today’s world, ICT is becoming an important factor in the future development of the financial services industry, and especially in the banking industry. Financial institutions (i.e. commercial banks) are faced with a number of important questions, for examples how to take full advantage of new technology opportunities, how e-developments change the ways customers interact with the financial services provider in order to be competitive in the sector (industry). Therefore, the analysis performed expertly is necessary for the future development in the banking industry to create change and innovation in new business methods (or channels) for delivering financial services more efficiently.
