Branchless Banking, Third-Party Funds, and Profitability Evidence Reference to Banking Sector in Indonesia

Abstract

This research was conducted on banking companies in Indonesia. The branchless banking services were to determine the effect of the branchless banking application to profits with the volume of third-party funds as an intervening variable or mediation. It was a program of providing banking services through collaboration with other parties (bank agents) and supported by information technology facilities. With Branchless Banking, the transactions were not dependent on the bank offices presence, due to the financial services and activities can be done through bank agents using Electronic Data Capture (EDC) owned by an agent. The research on branchless banking application in Indonesia was rarely conducted, but the implementation was relatively new. The variable used in the present study was Branchless Banking application as an independent variable, the profit changes as the dependent variable and volume of third-party funds as an intervening variable. These variables were obtained through theoretical and empirical studies. Data processing was conducted in using path analysis. The results of the study were branchless banking application did not significantly influence the number of third-party funds of banking companies in Indonesia. The branchless banking application amount of third-party funds have a significant effect on banking company profits in Indonesia. The branchless banking application did not have a significant direct effect on profits but there was branchless banking application which has a significant indirect effect on profit through the volume of third-party funds for the banking companies in Indonesia.

Keywords: branchless banking, electronic data capture, financial inclusion, profits, third party funds

JEL Classification: 45