Information Technology, Productivity and Profitability in Asia-Pacific Banks

Abstract

Past analyses of the relationship between IT, productivity and bank profitability in the U.S., Europe and Australia have shown both positive and negative linkages. This study considers the IT impact on productivity in two groups of Asia-Pacific banks based on reported profitability during the Asian financial crisis. In general, the banks perceive increased productivity, and both strategic and operational benefits from IT. The high costs of IT permit only suboptimal investments, in both IT capital and IT labor. Better management of IT resources enhances competitiveness through higher quality service at lower costs, delivered faster through a variety of channels more convenient to customers. IT investments and their proper implementation are more relevant when the banks are not performing well. Since increased productivity may not be adequately reflected in profits, profitability measures should not be used alone to measure the impact of IT on productivity.