The impact of e-money on bank performance in Malaysia

Most of the banks compete to provide online payment services such as e-payment/e-money which enable customer use as a mode of payment. Moreover, customer more prefer using e-money payment rather than cash payment since started of COVID 19 pandemic. This situation makes payment system change from cash to cashless payment. And now e-money are important and being use as a part in financial and payment system. This study investigates the impact of e-money on bank performance of conventional and Islamic banks. The data consists of 12 conventional banks and 12 Islamic banks over the period from 2004 to 2021. Two measures of bank performance ROA and NIM/NPM will be regressed with bank specific variables which are total asset, loan loss provision, total liabilities for the bank specific and also macroeconomic variables, GDP, CPI and BLR. The aim of this study focuses on e-money impact on bank performance. The results of random and fixed effect models show that e-money is significantly affect on return on asset (ROA) and net interest margin (NIM)/net profit margin (NPM) for conventional and Islamic banks. The result implies that e-money have significant contribution to the bank performance. With the higher of e-money usage, it is expected to contribute to the better return performance of banks ROA and NIM/NPM. With the negative relationship between e-money and bank return, the result of the study found that increase on e-money payment will decrease the bank return.