The Impact of Internet Banking on the Performance of Romanian Banks: DEA and PCA Approach

The modernization of the banking sector has been a defining trend in new EU member state economies over the last decade. Financial innovations in particular have provided banks with the necessary tools to obtain competitive advantages. In this context, the aim of our research is to analyze the way in which the financial innovation represented by Internet banking services can contribute to the enhancement of the overall efficiency of Romanian banks. We apply DEA to compute the aggregate efficiency score for each of the 24 banks in our sample and, in addition, we utilize PCA to classify the banks into different operational strategies groups based on their relative efficiency scores. The results show that there are very few banks in our sample that have utilized Internet banking services in their production process to increase their level of efficiency and thus the research proposes a series of solutions and recommendations.