The findings offer an important perspective on Indonesia’s rapid banking digitalization. Mobile banking, internet banking, and electronic payment services have changed how customers interact with financial institutions. Digital services are expected to make transactions faster, expand financial access, reduce dependence on physical branches, and strengthen banks’ competitiveness.
Yet the study shows that having more digital banking users does not necessarily mean a bank earns more money.
The researchers point out that digital transformation requires substantial investment in technology infrastructure, cybersecurity, human resources, system integration, and business-process changes. These investments may take time before producing measurable financial benefits.
Three factors examined in Islamic banking performance
The study examined three internal factors that could influence the financial performance of Islamic commercial banks: digital banking adoption, Capital Adequacy Ratio (CAR), and operational efficiency measured through BOPO.
Financial performance was represented by Return on Assets (ROA), a measure commonly used to assess how effectively a bank generates profit from the assets it manages.
CAR reflects a bank’s ability to maintain sufficient capital to absorb risks, while BOPO compares operating expenses with operating income. In simple terms, a higher BOPO indicates that a larger share of operating income is being consumed by operating costs.
The researchers collected secondary data from annual financial statements and official bank publications. The study covered Islamic commercial banks registered with Indonesia’s Financial Services Authority (OJK) between 2019 and 2023.
Thirteen Islamic commercial banks met the initial selection criteria. After extreme observations were identified and removed, the final analysis consisted of 55 bank-year observations.
The researchers then used multiple linear regression with IBM SPSS Statistics to examine the relationships among digital banking, capital adequacy, operational efficiency, and ROA.
More digital users did not mean higher profits
The first major finding concerns digital banking.
The analysis showed that digital banking did not have a statistically significant effect on ROA. The digital banking coefficient was 0.008, with a significance value of 0.368, above the 0.05 threshold used in the study.
This means that an increase in the number of digital banking users during 2019–2023 was not enough to produce a measurable increase in profitability.
The researchers suggest that the number of registered digital users may not accurately represent the intensity or economic value of actual transactions. A large user base does not necessarily mean customers are actively conducting transactions, using financing products, generating fee-based income, or reducing costs for the bank.
Digital transformation itself can also be expensive. Banks must invest in applications, technology infrastructure, cybersecurity, system integration, and employee development. As a result, the financial benefits of digitalization may not immediately appear in short-term earnings.
The implication is straightforward: banks should not measure the success of digital transformation solely by counting users.
Stronger capital was linked to better performance
The second finding involved capital adequacy.
CAR had a positive and statistically significant effect on ROA, with a coefficient of 0.662 and a significance level below 0.001.
Interestingly, this result went in the opposite direction from the researchers’ original hypothesis, which predicted that higher capital adequacy would negatively affect profitability.
The positive relationship suggests that, during the period studied, stronger capital positions may have helped Islamic commercial banks manage risks and support productive activities rather than simply holding excess funds.
The result is particularly relevant because the 2019–2023 period included the COVID-19 pandemic and major structural changes in Indonesia’s Islamic banking industry following the formation of Bank Syariah Indonesia.
According to the researchers, stronger capital buffers may have helped banks maintain financing activities and absorb potential credit losses during a period of economic uncertainty and industry consolidation.
Operational efficiency emerged as a critical factor
The strongest relationship identified in the study involved operational efficiency.
BOPO had a negative and statistically significant effect on ROA, with a coefficient of -1.469 and a significance level below 0.001. In practical terms, higher operating costs relative to operating income were associated with lower profitability.
This finding highlights the importance of cost management for Islamic banks.
When operating expenses grow faster than income, the amount of profit generated from bank assets can decline. The researchers therefore identify operational efficiency as a central factor in maintaining profitability.
They suggest that banks can improve efficiency through better digital processes, stronger employee productivity, tighter control of administrative expenses, and regular evaluation of operational spending.
Digital transformation must create economic value
Taken together, the findings reveal a clear pattern.
Operational efficiency was the dominant internal factor, capital adequacy contributed positively to profitability, while digital adoption measured by the number of users had not yet produced a measurable impact on ROA during 2019–2023.
For bank management, the findings suggest that digital investment should focus on economic outcomes rather than user acquisition alone.
A successful digital banking strategy should ultimately increase transaction volumes, generate fee-based income, improve financing activity, or reduce operating costs. Simply adding more registered users may not be enough.
The study also carries implications for regulators and investors. Regulators should continue paying attention to capital resilience, particularly during periods of economic stress. Meanwhile, investors and financial analysts should be cautious about using digital-user numbers as a standalone indicator of bank profitability.
Researchers urge caution when interpreting the results
The authors acknowledge several limitations.
The study examined 13 Islamic commercial banks over five years and used pooled ordinary least squares, meaning that differences among individual banks were not fully controlled. Ten of the original 65 observations were also removed as extreme values.
Another important limitation concerns the very high R² value of 0.987 and the exceptionally large statistical relationship involving BOPO. The authors explain that this may partly result from the accounting structure itself because BOPO and ROA share components related to operating income and expenses.
Future studies could therefore use panel-data methods, alternative profitability measures, and more refined indicators of digital adoption, such as digital users relative to total customers or bank assets.
Author Profiles
Rahma Sri Endah Mahesti: Faculty of Economics and Business, Universitas Muhammadiyah Purwokerto.
Hardiyanto Wibowo: Faculty of Economics and Business, Universitas Muhammadiyah Purwokerto; corresponding author.
Bima Cinintya Pratama: Faculty of Economics and Business, Universitas Muhammadiyah Purwokerto.
Nur Isna Inayati: Faculty of Economics and Business, Universitas Muhammadiyah Purwokerto.
Their study focuses on Islamic banking, financial performance, digital banking, capital adequacy, and operational efficiency.
Research Source
Article: The Effect of Digital Banking, Capital Adequacy Ratio, and Operational Efficiency on the Financial Performance of Islamic Commercial Banks in Indonesia
Authors: Rahma Sri Endah Mahesti, Hardiyanto Wibowo, Bima Cinintya Pratama, and Nur Isna Inayati
Journal: Indonesian Journal of Advanced Research (IJAR)
Volume: 5, No. 8
Year: 2026
Pages: 1319–1334
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