Ideal Self-Congruence: Neobanking by Traditional Banks and the Impact on Market Share - A Case of Uae Banks

Abstract

Purpose: The aim of this study is to examine the effect of adopting neobanking on the market share of traditional banks in the UAE and test the influence of financial performance indicators on the banks’ market share after the digital transformation. Theoretical framework: The financial service sector has been undergoing major transformation due to technological developments and innovations in terms of operating efficiency, client acquisition and organizational structure. Banks are accelerating digital transformation in an attempt to enhance digital presence, lower costs and gain market share. Neobanking is a recent innovation in the Fintech space that has disrupted the financial services sector. Design/methodology/approach: This study employs published data of quarterly financial statements from 2012- 2021. Chow Test was applied, with known structural breaks in the data, based on the implementation of neobanking and our results are based on pooled regression. Findings: The results reveal that neobanking has influenced the bank specific factors and those factors have affected the market share. NPL, ROE and NIM are critical for the market share with each variable affecting all banks contrarily. This paper further identifies that NPL and NIM has a favourable impact on the market share of only one bank. Cost efficiency has no effect on the market share of the banks in the period after launching neobanking. Research, Practical & Social implications: The study has important implications for the management of banks as the results affirm that structural changes made to adopt digital transformation by firms is the key to derive the favorable effects in terms of increased revenue, profitability and lower credit risk. Originality/value: Neobanking is the most recent disruptor in the financial services sector and effect of digitalization in banking sector is becoming the focus of literature of commercial banks. This paper provides insights into bank specific variables that impact financial performance after its digital transformation.

Assessment of the Profitability Indicators of Armenian Commercial Banks and the Forecast of Possible Scenarios to Increase Profitability

“…NIM -Net Interest Margin. Profitability Measure based on interest earnings of individual banks (Banerjee, et al, 2022).…”

Neobank Adoption and Satisfaction: Insights from University Students

“…The digital transformation and its impact on market share indicate a significant influence on bank-specific factors, impacting the market share of traditional banks transitioning to neobanking models Banerjee et al (2022). Moreover, the role of innovation in the fintech sector, particularly in 2 of 11 neobanking, is highlighted as a critical element for the sector's growth and customer satisfaction Hrytsenko and Yatsenko (2022).…”

“…Research into neobank adoption underscores a blend of technological, psychological, and socioeconomic factors influencing consumers' decisions. Studies identify digital transformation and market share impact as pivotal, suggesting that neobanking significantly alters traditional banking paradigms by leveraging technology to enhance service delivery and customer engagement Banerjee et al (2022). Innovations in technology and the management of cyber fraud risks are also critical for fostering neobank adoption Koibichuk et al (2021), highlighting the balance between innovation and security.…”

The Role of Financial Literacy in Achieving Financial Satisfaction Through Financial Well-Being

“…Marsh (2006) describes the financial behavior is how individual responds to the obtained data and make decision as result. After the Corona 19 pandemic, it became necessary for financial dealings to be in accordance with financial technology, which requires increasing financial knowledge (Banerjee et al, 2022). A person's ability of managing his/her personal finances becomes an important matter.…”